Market collectively finished on the downside with a nice -18 cents settle on Soybeans X6. The $10 level was too good to be true and farmers are seeing a good selling opportunity as the record harvest seems to be bigger than even expected. Corn followed with -5.75 cents on the theme. FC Stone said “US soybean and corn yield optimism grows across our US elevator customers” and is now expecting 52.8 bushels per acre on corn and 175.3 bushels per acre on Soybeans, respectively raising their estimates by +0.3 bushels per acre and +0.1 bushels per acre). Should USDA WASDE match those, it would bring +2.91MT of US soybeans production and +4.19MT on corn… Stay tuned on November 9th to figure out the answer! Wheat had no other choice but to follow but with much less conviction and was down -2 cents in Chicago, -1 cent in Kansas and was slightly more convincing in Minneapolis with -7.25 cents. The premium of Minneapolis to Chicago was down to 105.25 cents on the close ($38.67/T). Nice show on the other side of the pond, and it raises even more question about the captivating story unfolding: CME EU -€6.50 while MATIF was down only -€2.75, in other words, CME EU premium was down -€3.75 to still a big €12. But it was a public holiday in France so it was very low volumes and these kind of movements can happen indeed with low volumes: 57 lots traded on CME EU Z6 but a ‘good’ 16,997 lots on MATIF. Yes, these days one has to be satisfied with such volume on MATIF… From the start of April 2015 to the end of October 2015, MATIF Z5 average daily volume was 19,883 lots. This is to compare, over the same period of 2016 on Z6 to a daily average of 15,099 lots, in other words, volume is down -24.06%.
Night session is still weak on Soybeans, -2.25 cents, mostly flat on Corn, the back of the curve is just ticking up, while Wheat is barley up +1 cent. MATIF Wheat is ticking down and CME EU is rebounding +€1.50.
South Korea Kocopia bought 55,000T of corn at $192.20. Still in South Korea, MFG bought 63,000T of con at $186.75+$1.25 CNF.
In India, USDA attaché cut by -3MT its estimates, so we should see 87MT in the next WASDE.
US Oil Inventories are expected to show a build-up of 1.6M barrels. Well,… The last 9 weeks, market was expecting a build-up, and a withdrawal actually happened 7 times… And sometimes with a huge miss: 15.1M barrels difference between actual and estimates being the biggest miss. Oil keeps going down, NYMEX Crude is trading below jus $46 and ICE Brent around $47.50. On freight, Baltic Dry Index BADI was down -2.22% on lower demand on every size segment.
It can be a shaky day on the currencies markets: we’ll start by the Non-Farm Payrolls, they’re expected at 166k (up from 154k last month which was a huge miss of the target and a -21k decrease from the month before), there will be the Crude Oil Inventories (although the effect is inconsistent on the currency markets as there are both inflationary and growth implications whatever there’s a build-up or a withdrawal, but it can create volatility) and finally the FOMC! Will the rate hike happen this time? Market widely expect it will come only in December but last FOMC, governors could not be closer of doing it, so what will be the excuse this time? The cannot directly justify a status quo by the US Elections next week, but these elections are like a season of House of Cards already, so pouring oi on the flames is not necessary. The Chicago PMI was screaming stagflation, so there’s still a way out for FED but their credibility is now at stake. If it’s happening, for sure there will be a huge pressure on EURUSD. If, as expected, it’s not happening, will it be neutral? Not sure, a quick spike above 1.13 is totally possible as some will think that the last opportunity this year will be in December and will cast doubt on whether it will happen or not. We’d have to wait for the FOMC minutes to understand why it hadn’t happen. EURUSD is higher already this morning, trading just below 1.11. GBPUSD is slightly stronger, around 1.2275 as Construction PMI was better than expected. The apocalypse of the Brexit vote is still awaited…