Tuesday reversal and Monday gains have vanished. Despite the fact temperatures are expected to soar for a few days in the US, market focused on the rating of corn and beans (stable) as well as the yields of wheat (hearing more parcels over the symbolic 10T per hectares, this is a staggering 148.70 bushels per acre). This is so far very encouraging and the drought fears are vanishing. Corn is pollinating and silking pretty well in very good condition and everyday elapsing with an appropriate soil moisture is a good news as this stage is very sensitive to drought. But the latest an actual drought would come, the eventless it would be. And so far, fears are not being materialized. Corn and beans are stressed in some parts but the vast majority of the producing area is not concerning at all. Everything closed down quite in harmony: Soybeans down -30.25 cents on Q6, curve still in backwardation, Corn down -13.50 cents on U6 and Wheat down -10.25 on U6 in Chicago. Kansas and Minneapolis resisted slightly, just failing to put two digits on the loss. MATIF resisted very well, helped by a lower EURUSD and having its own concerns on yield and quality. In a week or two, we’ll have a much better visibility on the French crop but start is very heterogeneous in terms of yields and test weights.
In Chicago, funds were back on the sell side, more than reverting the Monday’s purchase: they sold 19,000 Corn, 19,000 Soybeans and 3,000 Wheat. Yesterday was the cutoff for the CFTC’COT. Reuters estimated that from the 13th to yesterday, funds sold 8,000 Wheat, 21,500 Corn and 26,000 Soybeans. This would increase the Wheat short to 123,000 lots, reduce the Soybeans long to 133,000 lots and Corn would be short 13,000 lots! That’s a big thing, Corn long has melted and funds are now short. And cumulated position of Corn, Wheat and Soybeans are now on the short side. For sure, monitoring the funds behavior on Soybeans will be pretty interesting for the next couple of weeks.
Night session already sideways and Soybeans are down a couple of cents after trying to do a reversal of the Tuesday reversal (getting complicated there). Corn and Wheat juts ticking up while MATIF is still finding supports from the crop concerns and EURUSD approaching the big 1.10 level.
In Germany, French consultant Agritel sees soft wheat crop to 26MT, -1.9% from last year. In Ukraine, harvest is 47% completed and 11.3MT of soft wheat has been harvested, this is +28.41% above same stage last year. That’s why there’s no massive concern of lower crops in France or Germany as Black Sea will come to the rescue in a dramatic manner! USDA’s attaché in Australia has pegged the wheat crop to 26MT (+6.12% from last crop), current WASDE is at 25.5MT, so one can expect a raise in the August report. Barley is seen as 9MT (+4.65% from last crop). There was beneficial rains in Australia the last couple of months indeed.
South Korea MFG bought 70,000T of corn at $190.50 CNF (+$1.25 of unloading), optional origin. Also in South Korea, Kocopia bought 55,000T of Corn at $198.87 CNF. On the other side of the Sea of Japan, Japan received no offer in the feed wheat and barley tender, the SBS tender is not massively popular indeed. They are still seeking 165,048T of food wheat. Syria bought 200,000T of wheat, likely to be sourced from Russia at €164.31 CNF. Finally, India is pushing back the deadline on the 80,000T corn tender, deadline is now the 22nd of July.
Oil is now established below $45, NYMEX Crude being just above $45.50 while ICE Brent still carries a $46 handle. On Freight, Baltic Dry Index BADI retreated -2 to 746, ending a series of 19 days up. Gold is struggling these days, it really feels like the panic factor on Brexit is over, now just below $1,325.
GBPUSD is still a bit shaky, Boris Johnson has done pretty well in Brussel despite the fact being bullied by journalist in a tough press conference with John Kerry. Market has now integrated that Article 50 won’t be triggered for a while. John Kerry said by the way there would not be any trade agreement with the UK before the leave the EU. Well, that’s a bit obvious, as long as they haven’t left, trade agreement in place with EU will still be in force… EURUSD is approaching 1.10, it seems like the mood of a rate hike in the last quarter of the year is coming back.