Friday ended in a softer note with no major move in Chicago: Soybeans -1.75 cents, Corn -0.75 cents, Wheat -1.50 cents. A bit more action in Kansas (-2.75 cents) and Minneapolis (-4.50 cents) but there was a lack of clear conviction. Hurricane in the US has not brought trouble on crop areas. Australian weather fears are easing. On the other side of the pond, MATIF went down -€1.25 and CME EU increased its premium at I was only down -€0.50. London Wheat was up +£1.20 as collapsing British Pound will definitely bring some competitiveness to origin. In Chicago, funds sold 500 lots of Wheat, were even on Corn and bought 1,000 lots of Soybeans.
Overall, not much move week on week: Soybeans up +0.29%, Soymeal +0.23%, Soyoil -0.39%, Corn +0.89%, MATIF Corn -1.44% in US dollar, ICE Canola +0.05% in US dollar, MATIF Rapeseed +0.12% in US dollar. Despite the seasonal lack of fundamental news, Wheat was more animated. The concerns on Australia were easing and the Canadian issue about fusarium could just switch demand towards other origin without any real global impact. Chicago went down -1.80%, Kansas down -3.01%, MATIF down -2.52% in US dollar, CME EU down -0.50% in US dollar and London LIFFE -2.53% in US dollar. London Feed Wheat was actually up in sterling but the -4.18% on the currency over the week surely helped! Minneapolis was also up +1.46% on the aforementioned Canadian issue.
A lot of spreading action… Minneapolis ended the week with a premium of +$46.76/T to Chicago and +$43.73/T to Kansas, respectively up +$5.42 and +$7.35 over the week. MATIF ended the week at +$30.78/T premium to Chicago (+$1.88 over the week) and +$27.75/T over Kansas (-$0.05 over the week). CME EU ended the week at +€6/T premium to MATIF, +€3.25/T over the week. Back in Chicago Wheat finished 55 cents above Corn, giving up -10.25 cents of its premium. Soybean ratio to corn moved from 2.8330 to 2.8160 last week.
US dollar made a nice grand slam last week, stronger versus euro (EURUSD -0.35%), Pound Sterling (GBPUSD -4.18%), Canadian dollar (USDCAD +1.29%), Aussie dollar (AUDUSD –1.03%), Brazilian Real (USDBRL -1.22%), Argentinian peso (USDARS -1.08%) or Russian rubble (USDRUB -1.03%). This is due to encouraging macro stats, it’s now fair to say that market will be massively disappointed if FED is not hiking the rate in the December FOMC (November is seen as too politically touchy) and the FED would take a huge credibility hit. On the GBP, there’s the Brexit component: market is feared about how tough and actual Brexit would be (the British MP Theresa May said she will trigger the Article 50 of Lisbon Treaty in March) and French President Francois Hollande made comments, to make a point and send a signal to other countries not to have the same independence pipe dream as the UK: ‘there must be a price’, there will be ‘economic and human consequences’. A bit of scaremongering there but an algorithm got scared and did a virtual fat finger, sending GBPUSD as low as 1.1450 before recovering.
Egyptian pound could be devaluated pretty soon by the Central Bank, GASC is doing (or trying to do) a lot of shopping before this: they recently purchased 240kT of wheat, 60kT of soybean oil and 33.5kT of sunflower oil. They are seeking 100kT of medium grain white rice. They cancelled the raw sugar tender though, as they received only 2 offers, best one was $558.80/T CIF.
Pure spreading week on the CFTC’s COT, basically, funds sold Wheat versus Corn and Soybeans. Indeed, funds increased their short position by 20,000 lots on Wheat to 151,417 lots while they were on the buy side for Corn and Soybeans over the week, by respectively 13,986 lots and 7,515 lots, reducing their short on Corn to 162,858 lots and increasing their long on Soybeans to 65,167 lots. Interesting to note, it did not take a lot of funds buying to make a +5.77% rebound on Corn (in a week ending Tuesday). Also, Reuters estimates was clearly off once again, market was expecting to see funds seller of 6,700 lots of Wheat and buyer 32,500 lots of Corn and 3,700 lots of Soybeans. Also interesting to see that on Minneapolis Wheat, funds are now long 2,284 lots as they purchased 2,590 lots over the week. From Wednesday to Friday, funds have sold an estimated 8,000 lots of Corn, 4,000 lots of Soybeans while they were even on Wheat, The overall short is now 261,000 lots, we can expect a bit of risk off before the Wednesday USDA WASDE but if Soybeans are as good as expected (or feared), the remaining long on Soybeans could vanish pretty quickly.
On the WASDE, market is expecting 173.5 bushels per acre for corn (in other words a cut of -0.9 bushels per acre) and 51.5 bushels per acre for soybeans (+0.9 bushels per acre). Obviously, US soybeans and corn production will be monitored as such yield change would bring the US crop to 116.36MT on soybeans (+2.03MT) and 381.40MT on Corn (-1.98MT). Positive balance hey! Else, on average, market sees -0.65MT on the wheat world ending stocks, -1.14MT on corn and -1.11MT on soybeans.
Week is starting with diversity, no common move. It will be about adjusting positions until the WASDE report indeed. Soybeans are down -3 cents, Corn is up +0.75 cents and Wheat is up +5 cents in Chicago, +2.75 cents in Kansas while Minneapolis is losing a bit of steam, up only +1.50 cents. Market opened higher also in Europe, MATIF up +€1.00 and CME EU up +€0.75.
Oil corrected on Friday and is still softer this morning: US is pumping, adding rigs for the 6th week in a row and Russia cast doubts on the OPEC deal. It’s very likely that unless a clear enforceable plan is unveiled, $50 will be a huge resistance. NYMEX Crude is trading just above $49.50 while ICE Brent is around $51.75.
Euro and GBP are starting the week on a softer note also: EURUSD is trading around 1.1170 while GBP is just above 1.24. No major stats today, EU Sentix Investor Confidence and German trade balance. Unless another flash crash is bringing entertainment!