Green across the board but once again not much conviction in the movement, quite technical in the lack of real fundamental news. Just weather talks and short boredom. Soybeans lead the pack, finishing up almost +10 cents. Corn was following a bit behind with +4.25 cents on the close while wheat was a little cent higher. Funds bought 6,000 Corn, 5,000 Soybeans and were even on Wheat. On the other side of the pond, MATIF Wheat was down, still confused about how to deal with the French issue: France will import to satisfy export contracts but the availability in Eastern Europe and Black Sea is compensating. CME EU was just ticking down, so premium reached €7… If sellers next to silos, taking into account location differential, are keen on stuffing the silos, this could lead to an interesting move as the bulk of the volume is financial (market making and spread). A COT would be highly interesting here…
Main fundamental discussions was about the weather indeed … To be or not to be La Niña? Will it be back after almost 5 years of disappearance? So far models are suggesting that it won’t as models were suggesting an earlier build up, but it could still be on the table for a development within the next 6 months. The occurrence of the phenomenon would mean colder US winter, but drier, especially in the south part of the US but also in South America. Last time it appears, Q1-2012, it created the pop corn crop in the US. So definitely something to follow.
Night session is still strong across the board, soybeans are up +3 cents, Corn +1 cent and Wheat +1.25 cent. Smooth move in Europe, 3 first expiries of MATIF and CME EU up 3 ticks.
In Brazil, 51% of the corn is planted while 17% of soybeans are planted, in Argentina, corn planting have reached 32%. In other words, for South America, plantings are following there due course and are actually overall in advance compared to the usual trend.
US Export Sales back on their usual schedule today, expected 350kT/450kT for wheat, 650kT/800kT for corn and 750kT/900kT for soybeans.
GASC is back for the end of November, FOB price should be around $178 / $182 as far as Russian origin is concerned but considering the reputational damages, it’s very likely there won’t be a lot of very aggressive offers. They are quite wheat hungry these days (and other commodities but for different reasons, more like Central Bank related). Indeed, after a few cancellations, they are behind schedule on their purchase and they cannot afford to wait much more for a sell off because strategic stocks will decrease quickly, so it’s more like a panic purchase rather than their usual strategy to tender after a couple of sessions of selloff. At the end of October, the cumulated seasonal purchase was above 2MT on average for the 3 last year (last year it was actually above 2.5MT!). So there is some delay and the reason is obviously due to the ergot saga. Egypt is becoming a tricky destination in fact, there is a risk of rejection due to potential change on ergot policy and traders are getting cold feet. So there’s less offer as some just aren’t interesting in taking the risk, too much hassle, and the others are putting a risk premium in their price. GASC has bought 1.5MT so far this season so it’s fair to expect 2.5MT more as the stocks are currently only 5 months of consumption. It’s going to be very challenging in these conditions and they obviously have to bear in mind food security… And story may not be over as SGS denied having been appointed surveyor…
It was feared Malaysian exports of Palm Oil were to be lower as production took a hit on bad weather. Subsequently, X6 on Crude Palm Oil futures touched a contract high on Tuesday. And SGS said today indeed exports from the 1st to the 20th October were 806,458T, -12.1% compared to the same period in September.
On the Crude Oil side, market has been surprised – again – by US Crude Oil Inventories. A 2.2M barrels build up was expected and actual data shew a withdrawal of -5.2M barrels, this is quite a miss. But it is pretty usual with the data, over the last 46 weeks, market was expecting on average +0.5M barrels than the actual and with a huge standard deviation of 4.54M barrels… So market was surprised and almost rocked up to $52, stopping a few cents shy of the figure. It’s retracing today, trading just around $51 on NYMEX Crude, it doesn’t seem it is enough to give a new boost to $55 then $60. ICE Brent is trading with a $52 handle. On the other side this is quite offset by Gasoline inventories, they were up +2.5M barrels, so the drop in US Crude Oil stocks is partly explained by the fact they cracked more than needed, so not massively bullish. This is comforted by the fact the crack spread took a -5% hit on the news. On the Ethanol side, output was up 36,000 barrels per day, just 2,000 barrels shy of 1M barrels (998,000 barrels per day then) but it was not sufficient to satisfy the demand as stocks were down more than this, by -351,000 barrels to 19.04M barrels.
On Freight, Baltic Dry Index BADI was down -18 to 872 as Capesize Index was hammered -6.36%. However, this lower demand on larger vessels was partially offset by higher demand on mid-size vessels.
EURUSD is staying below 1.10. No major move or news though, just yesterday the US Building permits were above expectations to 1.23M. Today, Philly FED Manufacturing Index (expected at 5.2) and US Unemployment Claims (expected at 251k) can usually be market movers in case of significant divergence. GBP is slightly softer this morning but still above 1.2250, Retail Sales month on month were flat in the UK while +0.3% was expected.