Up to Tuesday, it was looking like it would be another bloodbath on the markets. But lower prices triggered fresh buying, and some ‘yes but’. Indeed, what if it is not as good as expected? There’s some talks about kernel abortion in on US corn and some cobs are not filled completely. As always it’s difficult to know the extent. Anyway, market bounced back sharply and weekly the bearish wave has been contained, Corn actually finished the week up by +0.08%! Soybeans and Wheat still finished down -2.25% and -2.67% but it could have been much worse. Anyway, it’s a universal market rule, a healthy trend has to have waves of retracement, else, this is a bubble. MATIF Milling Wheat went down -0.32% in euros while EURUSD went down -0.38%.
Following the trend on Friday, funds bought 5,500 lots of Corn, 2,500 lots of Soybeans and 2,500 lots of Wheat in another recovery session: Wheat went up +5 cents, Corn +5.50 and Soybeans +9.50 cents. MATIF was slightly more shy with +€0.50, there was poor volumes. MATIF U6 will get out of the board next Monday (maybe we’ll know more about the Romanian wheat: will it go to delivery?), the same day the CME European Wheat contract will start trading, with the same expiries. CME should be higher than MATIF, it’s going to be for sure pretty interesting to see if two pretty close wheat contracts can survive at the same time.
The CFTC’s COT showed no real surprise: funds has sold all week long on the week ending Tuesday. They increased their short position on Corn and Wheat by respectively 8,561 lots and 17,896 lots, reaching a respective short of 162,503 lots and 121,873 lots. They decreased their long position on Soybeans by 27,665 lots, going back below ‘the century’ to 99,633 lots. The most interesting takeaway is on Corn. Reuters had estimated funds sold 50,500 lots along the COT week and it’s actually only 8,561 lots. So in other words, market lost -7.46% with less than 10,000 lots selling pressure from the funds and despite producers and merchants logically bidding (they purchased 34,576 lots).
US labour day today (well, to be spelt labor…) so US markets will be closed today, very likely to be a quiet day then on the MATIF but with more or less everyone back from holidays it could provide some nice movement when traders will discover the disaster on their book. But so far, just a tick down… Yawn…
Back to school tender also for Algeria’s OAIC, they are seeking 50,000T of milling wheat. Jordan is also there for 100,000T of feed barley. In Egypt, GASC has written to Ministers to share their point of view on the ergot saga, warning them about supply concerns. And there’s issue on sugar as well. GASC had to cancel a sugar tender last month due to low participation and only two trading houses have bid this time. They did purchase 50,000T of Brazilian raw sugar though at $491.50 CNF. Egypt definitely needs to build confidence back up as phytosanitary and payment concerns is bringing concern across all the commodities. However, we should see GASC coming for another try on wheat pretty soon. Pakistani importers bought 66,000T of US soybeans over the past couple of weeks.
On oil, the build up to the OPEC meeting is going on… The only way there will be a significant action on the supply is if everyone is in agreement and this beyond OPEC. Indeed, there’s a thing that is not to be forgotten, there’s only one OPEC member in the top 5 producer of petroleum and other liquid products: Saudi, on the second rank. US being the first, Russia the third, China the fourth and Canada the fifth. OPEC is facing the issue of their members have not the same interest. The second biggest OPEC member (the UAE) is only producing 29.86% of what Saudi is producing, and Iran and Iraq are just behind. Iran obviously want to be back in the top 5 to re-establish its market share, while the UAE is much less dependent on oil than Saudi, so there’s a lot of different point of views in the OPEC that make any supply cut unrealistic at the moment. Also, US and Canada have no reason to lead a supply cut. So this $40/$50 range on market could last until there’s a significant move on the S&D. NYMEX Crude is starting the week on a higher note, just below $46 and ICE Brent is in the mid-$48’s.
On currency, no major move just yet, EURUSD is trading a tad higher but nothing extraordinary, just above 1.1150, good Sentix Investor Confidence has just been published. GBPUSD is in a good shape, above 1.3350, good service PMI, growing much more than expected. Real alleged bad effect of Brexit (well the psychological effect has the actual Brexit is far from being triggered) is still to be seen in macro statistics. Market is not impressed by Japan ultimatum: they will move European headquarters out of the UK if there’s a Brexit. G20 meetings are undergoing, there might be some other familiarities like these!