Red across the board to start the week. Indeed, Corn closed -7.5 cents lower, Wheat -8.75 cents lower and Soybeans -9.75 cents lower. Funds sold 11,000 lots of Corn, 6,000 lots of Soybeans and 4,000 lots of Wheat. On the other side of the pond, MATIF closed down -€1.25 and CME EU also closed down -€1.00, premium to MATIF is increasing by a marginal but still abnormal +€0.25. Selling CME EU versus MATIF is profitable in regards of the quality specs, all other things equal, including those that are unexplainable… CME EU is still a very interesting one indeed. On Z6 it’s trading $36 dollars above Chicago SRW and €1.5 above MATIF. On the US spread it’s interesting to put the cost of freight into perspective, from US Gulf to France it’s probably roughly $20 dollars for a Panamax, so is $16 an acceptable quality premium (SRW is usually between 74kg/hl and 77kg/hl test weight and 10% protein), location differential, cost and FOBing? And €1.5 premium to MATIF is also abnormal. So definitely, at some point, there will be some arbitrage triggered and the offer side of the order book of the CME EU will be more furnished at some point.

 

It was a typical ‘yes but’ day. Yes there are and was a few concerns around but market obviously was not really caring about them: it’s been wet indeed in the US and the corn and soybeans harvest have not been as quick as it could be. Corn harvest is below the 5 year average indeed… If that is an undisputable fact, it’s however including the 2012 pop corn crop which his clearly an outlier as the crop was so small and deteriorating so quickly that in week 4 of the harvest, almost 40% was already harvested. This is obviously bringing the average higher and the current delay is not a concern at all. Harvest is more or less at the same stage than 2011 which finished in advance (so the small delay was easily made up for) and 2013 and 2014 were not even at 10% at this stage. So there’s actually no point discussing about this, especially considering the fact the weather forecast for the next 10 days are pretty good and soybean and corn harvest should pace up. One of the other concerns is about western Australia: there’s some frost here and there. As usual, it seems there’s over communication about the phenomenon, it seems firstly not to be cold and long enough to put wheat at risk and also, it’s very localised, it’s not widespread by any means. And winter kill is a bit like Waiting for Godot, we’re talking a lot about him but he never comes!

 

So as mentioned, crop progress is back on schedule. Corn is at 15% (9% last week, 19% for the 5 year average) and soybeans are harvest at 10% (4% last week, 13% for the 5 year average). Once again, no need to panic just yet, delay can be made up and it’s not like there’s a hugely problematic weather pattern deteriorating the crops from one day to another. This is supported by ratings that did not move: Corn are still 74% G/E and 7% P/VP (respectively 68% and 10% last year) and soybeans are 73% G/E and 7% P/VP (respectively 62% and 12% last year). On the other side, planting are going well, 30% of the winter wheat is planted, +2% above last year, right on the 5 year average.

 

Sweet, neutral and sour. This can describe pretty well the export inspections. Sweet on wheat, 875.0kT, more than expected and more than what is needed (almost double!) on the average weekly split. But wheat better get some advance now as big corn and soybeans crops will flood international markets. Neutral for corn, as expected to 1,335.6kT, above the weekly split. This pace will have to sustain as corn will need to do 1MT per week for the whole season, will it sustain? It’s been 17 weeks in a row corn inspections were above 1MT. Sour for soybeans, and it’s a nice word, this is pathetically low at 384.0kT. More than 1MT is needed every week, with old crop crush expected to be lowered in the next USDA WASDE and concern on demand, it better bounce back up durably as in the last 10 weeks, soybeans shipments reached 1MT on only 2 occasions.

 

MARS report is out! EU Crop Monitor cut the soft wheat yield to 5.63T/ha (previously 5.86T/ha), cut the corn yield to 6.84T/ha (previously 7.23T/ha) and rapeseed yield is unchanged to 3.20T/ha. On the Corn side Agritel sees the French crop to 12MT, blaming the dryness. This is to compare to the 12.158MT from France Agrimer. Also, Romanian crop is slashed to 8.75MT from 10.7MT previously.

 

Night session is pretty quiet, technically green across the board, tradition reversal Tuesday? However, Soybeans are only up +2.5 cents, Corn is just ticking up and Wheat is up +1.25 cents. MATIF and CME EU are also just higher, just a tick or so.

 

On currencies, EURUSD is slightly lower this morning but is not really moving, stuck between 1.12 and 1.1250. German IFO was better than expected to 109.5 and Italian retail sales worse than expected to -0.3%. Consumer confidence in the US today could give a bit of animation. Oil rebounded yesterday and is retracing today but is now back above $45 on fresh but volatile hopes that the Algiers meeting will have an impact on the supply. NYMEX Crude is around $45.25 and ICE Brent above $45.50.

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