Friday Soybeans were back up and were +8.25 on the close, Corn followed from far, very far with a little +1 cents while Wheat was unimpressed and was lower -2.75 cents on the close. Funds bought 4,000 Corn and 5,000 Soybeans while they sold 2,000 lots of Wheat. Well… According to Reuters, it has been proven once again the accuracy is very low, especially when there are big positions swings. MATIF Wheat was just ticking up while CME EU was again stronger than MATIF, finishing at +€1. They were clearly helped by a weaker euro.
It was a mixed week really, the oilseeds complex was the leader on the green side: Soybeans up +2.13%, Meal up +1.96%, SoyOil +2.15%, ICE Canola up +1.50% in US dollar, MATIF Rapeseed +0.61% in US dollar. Technical rebound and good demand were the main factors. Corn was down week on week in an unconvincing move though: -0.49% in Chicago and -0.95% in MATIF in US dollar. Wheat was a bit all over the place: Chicago was down -1.54%, Kansas up +0.90%, Minneapolis +0.09%, MATIF down -1.25% in US dollar, CME EU up +0.67% in US dollar and LIFFE up +0.17% in US dollar. Minneapolis is still at a good premium of Chicago and Kansas, finishing the week respectively at 114.5 cents ($42.07/T) and 107.5 cents ($39.5/T). There is still the same issue on Canadian wheat, contaminated by fusarium (quantity is still expected to be 31.5MT by Canadian authorities). MATIF was $25.08/T above Chicago and $22.51/T above Kansas. But in Europe, the main point of interest is the CME EU premium to MATIF, closing at €8.50. CME EU delivery process seems much more attractive than MATIF, making easier to do cash and carry while for the MATIF delivery there is huge incentive on taking the delivery at the expiry rather than carrying on the silo (I’ve been to the delivery once…), so that might explain a part of the premium but €8.50, including the lottery on location and the lower quality, even with location discount, it begins to be pretty expensive compared to MATIF. This is for sure captivating and delivery to silos will be interesting to analyse.
A week also driven by US dollar strength. Good macro stats are making the case for the FED’s rate hike. EURUSD has been down -0.79% over the week, with pressure added from the ECB, QE is not over by any means. USDCAD was up +1.47%, AUDUSD down -0.12%. USDJPY was down -0.36% though, as well as USDGBP: +0.39%. There is still a lot of uncertainty around Brexit: will it happen? Will it be a hard Brexit or a good deal? Cross rate EURGBP went interestingly down -1.14% over the week. Either there’s hope a good deal will happen, either marker is realising that so far the UK macro stats aren’t showing the predicted cataclysm.
Weather was the main discussion, will La Niña show up? Will Canadian farmers got squeezed by an early winter and will have to give up acreages? Will South America be too wet?
Huge miss again on the CFTC’s COT. Reuters was expecting funds to have bought 11,800 lots of Wheat 8,000 lots of Corn and 12,500 lots of Soybeans. This is quite off indeed, funds actually purchased 33,155 lots of wheat (reducing their short to 102,251 lots), 60,995 lots of Corn (reducing their short position to 69,978 lots) and 14,582 lots of Soybeans (increasing their long to 87,651 lots). The followed the trend, during the CFTC’s week (week ending on Tuesday), Wheat moved up +5.86%, Corn +4.97% and Soybeans +2.86%. The short is melting at a very quick pace and cumulated short is now around 90,000 lots. Funds are also betting on the seasonal, at this time of the year, it’s unlikely to see a massive bearish news coming on board, potential move on the balance sheets can only be bullish on the southern hemisphere in the near future. Last words on the COT, it’s interesting to see that funds buying have met very decent producers and merchant sales and they even sold more Soybeans than the fund’s bids. One can see this rebound as a relief as the US crop is going to be an outstanding record.
There’s some hopes that Russia will work alongside OPEC in a bid to reduce the production and bring the prices higher… But on the other side, in September, OPEC pumped 33.39 million barrels and Russia 11.1 million. If OPEC is cutting to 32.5/33 as expected, this is between -1.17% and -2.67%, one can wonder if it worth a rebound from $40 to $50… So there’s a need of Russia and Iran to be on board for the supply impact to be significant. But Iraq wants to be exempted like Nigeria and Libya because of military conflicts happening on the territory. They added that they should be able to produce 9M barrels per day if the country had not been impacted by wars over the last 35 years (they currently output 3.37M barrels per day). Meanwhile US Oil Rig count rose for the 5th week in arrow to 553. So until we have a clearer picture, Oil will be stuck around current levels: NYMEX Crude is still carrying a $50 handle, trading close to $51 though, while ICE Brent is a bit less than $1 at premium.
Night session is green across the board, with Soybeans leading the way again, on their way to test the $10 level as they are +13.50 cents on X6 (to 996.50cents, while other expiries are already above $10). Corn and Wheat are lagging, respectively up +1.50 cent and +2 cents. Opening was also strong in Europe, MATIF is a tick up while CME EU 2 ticks up, that’s a tick more on the premium! No major move on the currencies just yet, EURUSD is a tad up approaching 1.09 while GBPUSD is also slightly stronger just below 1.2250.
To follow today, export inspections. We need to see more than 1MT for corn and soybeans. Last week number for corn was far from being pretty so market will keep an eye on it, as well as on wheat that failed to reach the average required pace for the last 2 weeks. Also the crop report, winter wheat planting should be between 78% and 83%, Corn harvest is expected be in the region of 60% while soybeans are seen above 70%. On the macro side, France, Germany and Euro area PMI’s were good overall this morning, only French Service PMI failed to reach expectations. Flash US Manufacturing PMI later today.