Once again, the market is focused on Soybeans and Corn and Wheat are just printing marginal move. Soybeans finished down almost -15 cents yesterday. Yields reports are outstanding, so far, very few are in the 50’s, we’re more talking about 65 bushels per acre but this is the beginning, based only on 60 harvest reports. As per the corn, 115 reports are suggesting yields above 210 bushels per acre… But most of the bad fields, and there are some, are still to be harvested, so no excitement. Corn was down also but no more than a couple of cents while Wheat was +1 cents or so up. Funds sold 9,000 Soybeans, bought 1,500 Wheat and were even on Corn. In Europe finally a bit of buying pressure on the MATIF / CME EU spread, both finished down but MATIF resisted well, is this the turning point? There is still no valid reason for a such situation, either there will be a squeeze at the delivery, either there’s an arbitrage possible where it shouldn’t be.
Same scenario on the night session. Soybeans are down -3 cents and no major move on Corn and Wheat, marginally up on little volume. MATIF is expected to tick up, while CME EU is not liquid enough just yet to show reliable theoretical opening prices, therefore, as often, expected flat on the open.
It was expected GASC to retry pretty quickly after the yesterday announcement. Indeed, government is backtracking again (again, again, again actually)! It begins to look like cricket runs, back and forward a multiple of times! Some are feeling dizzy watching this saga, this shamble… Government said they will reaccept the international standard of 0.05% of ergot. However, en-route shipments are still carrying some kind of uncertainty. Anyway, GASC is back today then. But it’s tough to imagine traders are going to act like nothing ever happened. Confidence has been badly hurt and traders are likely to be more keen on watching someone else booking the deal rather than themselves. So it will be really up to those who are desperate to sell. With 72.7MT of wheat harvested in Russia (91.2% of the area), there might be a bit of room to be done in bins and silos but surely Egypt will have to pay a bit of risk premium here, with traders not showing up and with those still sceptical about the Egyptian reliability, there won’t be a lot of desperate offers, especially when Russia made it clear (however a part of it is calling their bluff) that their export don’t need Egypt.
Still in Russia, 17.4MT of barley is harvested (93.4% of the area), and 2.7MT of corn (17.5% of the area), this is so far 93.8MT cumulated. Government said they see a grain crop of 110MT to 116MT, allowing to export 40MT. In Canada, StatsCan raised it spring wheat crop will estimates by +4% to 20. 6MT. Canola is pegged at 18MT. Morocco is said to have purchased 235,000T of wheat around $197 CNF.
In France the wheat crop has been advertised as “calamitous” by ODA, with only 28MT of soft wheat, it seems harsh but true, crop is -32% lower than the year before indeed. What is interesting it to have a look at the map: the northern axe of France, from the Center, the south of Paris, the east of Paris and the North of France, is the part taking the biggest hit, -40% to more than -50% lower. This is a bad news for the CME EU, should lower yield be correlated to lower specific weight (likely), operators will struggle to deliver 74kg/hl mini in these areas. The western part of France is the least hit and around Rouen and La Pallice it is not actually too bad, and if it’s also better quality it could lead to interesting paradox: will the best quality wheat exported despite the fact there’s internal needs? The import and export landscape in France is going to be dramatically reshuffled. In terms of economy, because there’s no global problem, French wheat prices are not surging and it’s going to hit bi €3b the trade balance. There’s a couple of areas that are actually doing better than last year on the southern part of France but area are not significant enough to compensate. Still in France, there’s a bit of confusion around the health of former President Chirac (and actually also the former First Lady): if his passing was confirmed, it would certainly trouble the campaign of the right party primaries (Party of the former President Chirac and former President Sarkozy, who is by the way a candidate) and bring a bit of moroseness in France, in a year that has been really shaky and all the economic impacts of all different events are still tough to assess.
So the official survey was expecting a build-up of +3.2M barrels of US Crude Oil Inventories but it chatters since 36 hours were clearly leading to an ‘unexpected’ ‘surprise’ withdrawal. And it did happen, US Crude Oil Inventories decreased by -6.2M barrels. Gasoline inventories also fell more than expected by -3.2M barrels at there was a pipeline outage and a gas run in some parts of the US. On the other side, distillates inventories increased by +2.2M barrels. Oil obviously rebound and is back above $45.50 for the NUMEX Crude, while ICE Brent carries a $47 handle. Meanwhile, Saudi Arabia have met with Iran before the Algiers meeting, but it seems it has not been massively productive and nothing is expected from the OPEC meeting. Maybe it’s time OPEC to rethink itself as the members interests are not the same as in 1960. In theory, this was not a massively bullish week in ethanol: if stocks reached their lowest since December 2015 (to 20.02M barrels, -191,000 barrels from last week) this is mainly explained by a lower production which decreased by -23,000 barrels per day to 981,000 barrels per day, so the demand was far for being massively higher but Ethanol futures rose +1.1% on the news. On Freight, Baltic Dry Index BADI keeps on being on fire, +4.39% (+38) to 903. It’s once again mainly due to higher demand on higher vessels.
FOMC. As expected, nothing. Press conference was hawkish. Door is clearly opened for a hike in 2016. Well the issue is it’s been the case for weeks if not months, at some point there’s a credibility issue and market was clearly dissatisfied, EURUSD rebounded and is now back close to 1.1250, Gold also rebounded above $1,330,… Despite the fact they are not influenced politically, we cannot expect it to happen 6 days before the US elections, so last chance is December. Yellen said the case of a rate hike has strengthened but the low inflation and ok but not good enough economic growth led the majority to hold back. But the board was clearly divided, 3 of the 10 voting members were in favour of a rate hike. Bankrate.com said quite fairly “this is about as close as you can get to raising interest rates, without actually raising them”. So the appetite for a hike is definitely growing, and 14th of December is likely to be – Finally – the day. US Unemployment claims today are expected at 261k, +1k from last week.