Friday ended up as a complete write-off, a typical Friday with no major move and no major news. Market was probably getting ready for this week: US Elections & USDA WASDE could bring a lot of volatility on markets. Soybeans ended up the week with a +1.75 cent move Corn +0.75 cent, and Wheat settled +2.25 cents higher. Funds bought 2,500 lots of Corn, 2,000 lots of Soybeans and 1,500 lots of Wheat. On the other side of the pond, MATIF ended up the week a couple of ticks down while CME EU was flat. After Z6 options delivery on the MATIF in the middle of the month, the clean-up could be interesting in regard of the discount to CME EU!
Let’s look at the week as a whole. On Corn and oilseed complex, the weekly movements were quite coordinated: Soybeans lost -1.97%, Soymeal -2.68%, SoyOil -1.98%, ICE Canola -2.70% in US dollar, MATIF Rapeseed -0.96% in US dollar, Corn -1.76%, MATIF Corn -0.89% in US dollar. The prospect of a bearish USDA report this week led farmer to sell. Wheat market were in a structural and technical mess and were all over the place: Chicago was up +1.41% during the week while Kansas was only up a tick (+0.06%) and Minneapolis gave back a lot of its premium ending the week with a -2.72% movement. On Z6 contracts, Minneapolis is back below 100 cent premium, ending the week at 97 cents premium to Chicago and 98.50 cents premium to Kansas. On the other side of the pond, MATIF Wheat was down -0.31% in US dollar and CME EU down -1.44% giving back some of its premium (ending at €12.50). London Wheat was up +2.10% in US dollar, current British Pound success and lower availability in western Europe will be hugely beneficial to UK what that are set to be a record this year. Good for the UK’s trade balance for sure.
On the CFTC COT, funds were on the buy side. They reduced their short position on Corn by 3,954 lots (they bought less than expected) to 65,008 lots. Despite the purchase, market was down -1.41% over the CFTC week. They increased their long position on Soybeans by 12,008 lots (they bought more than expected) to 110,613 lots. Despite the heavy purchase, market was down -2.55% over the CFTC week. This is the interesting takeaway of this COT, funds are buying while producers are taking the opportunity to sell heavily, thinking this was an unexpected relief as the yields are going to be even bigger than expected. Finally, funds reduced their short on wheat by 12,755 lots to 110,632 lots. No major estimated change for the end of the week as it’s estimated from Wednesday to Friday funds bought 1,000 Wheat, and sold 3,500 Corn and 500 Soybeans.
Not much news really, it’s a bit drier in the US and a bit of rain would be welcome before wheat is entering into dormancy. In France, plantings are still delayed but have progressed pretty well last week to 78% for barley and 89% for wheat and 21% for durum. Corn harvest is 79% completed and 53% are G/E: yield is expected to be 8.2T/Ha and production 12.38MT: it’s going to be a tight call, will it be worse than the 2006 crop? In Ukraine, there are some pictures going around of mature corn fields covered by snow, it can cast some doubt on how much will be harvest on the remaining surfaces to harvest. So farm 67% of the corn area is harvested as winter plantings are more or less wrapped up.
Night session is showing some pace on Soybeans, double digits, X6 back above 990. Corn and Wheat are eventless is Chicago, mostly flat. Kansas is ticking up, Minneapolis ticking down. Not much excitement. Small start also expected in Europe with MATIF expected up a tick and CME EU expected flat.
Oil is on a losing streak, the biggest losing streak since decades (in percentage). As of Friday, in 12 sessions, market lost -14.59%. Friday was the sixth sessions in row on the downside, -11.37%. in 6 sessions? Will it be like the Brave Little Tailor? ‘Seven at one blow’? Market started the week on the higher side so, so far, it’s not going to be a seventh session in a row on the downside, but the day is long! There’s growing scepticism (despite the OPEC confirming this morning its actual wish to cut supply and confirming that Russia would be on board) about the global supply cut. Inside OPEC there’s still some divergence of opinion, and non-OPEC members could just increase the production to snap the higher prices. Quite coincidently enough, higher oil prices gave a bit of relief to Saudi, gave a bit of confidence to investors and on the 19th, they oversold their bond offering: initially seeking for $10 to $15 billion, it’s been filled with $17.5 billion… The same day oil topped to $51.93! A high since July 2015… There’s definitely something happening behind the scenes. Yesterday Egypt’s oil minister is said to have travelled to Iran (which is pretty rare, which also has been denied) to hold some talks as Saudi Arabia suspended the oil agreement with Egypt (there’s complex geopolitical reasons), Egypt needs to secure the supply. Finally, back in the US, there was an earthquake not too far an Oklahoma oil hub, nothing major reported just yet. NYMEX Crude and Oil Brent are up in excess than +1.5% trading resistively above $44.75 and $46.25.
Watching the UK news was pretty interesting over the week-end, what a mess… The British High Court said the Article 50 triggering has to go through the parliament. So in theory, parliament could overturn the result of the referendum. Nigel Farage (UKIP) think it would lead “political anger the likes of which none of us in our lifetimes have ever witnessed”. But it’s tough to imagine the British MP would overturn the referendum result, but issue is there’s different degrees of Brexiting: those who want a hard Brexit and those who want to negotiate to keep the access to a single market… And Jeremy Corbyn (MP, leader of Labour), said he would block the Article 50 if there’s no guarantee of the access to single market. So added to those who were on the Remain campaign and will still vote against triggering the Article 50, it could be a pretty tight call. Well, later Jeremy Corbyn said that bottom line, he’s accepting the verdict of the referendum. So there’s some potentiality of delays in triggering the Article 50. Quite fun, if the PM Theresa May was to shortcut the parliament anyway, it’s the European Court that should give its point of view! Market is therefore more confident a hard Brexit won’t happen, and even some are betting that Brexit won’t ever happen. Interesting time for sure, and if parliament is blocking the Brexit, one could wonder what is the point of a referendum then. In that case, Scots should go in their parliament and try to overturn the result of their own referendum for independence! GBPUSD is trading lower this morning, back down just below 1.24 as US dollar is getting stronger following the FBI decision to clear Hillary Clinton on the emails matter. Market seems to regain the confidence to see her elected. Answer in less than 48 hours… Hopefully! As there will be controversy, whatever the outcome is. EURUSD is also trading lower this morning, for the same reasons. Back below 1.11, just around 1.1150. German factory orders were down -0.6% month on month, lower than expected, but no major stat expected today. The other currency news is on USDEGP that ended the week at 16, a -44.5% devaluation in fact. Next GASC tender will be very interesting for sure. Finally, after ending the week above $1,300 per ounce, gold is logically retreating on stronger dollar, back to around $1,285 per ounce.