Finally an homogenous day, red across the board. Soybeans were leading the pack with -13.50 cents but Corn for once was a good contender and followed closely with -11.75 cents. If all Wheat were down, it is still messy on the spreads: Chicago was down -5.50 cents, Kansas down -12.75 cents (premium to Chicago closed at +14.75 cents) and Minneapolis -7 cents (premium to Chicago is still a good +150.25 cents and +135.50 cents on Kansas). MATIF suffered also, down -€4.25, CME EU down only -€1.25 (only 29 lots were traded sadly on Z6, should the contract failed, this would be a huge disappointment as it brings what MATIF is lacking), bringing its premium to MATIF to +€12.75. There was some pressure on MATIF Z6/H7 spread as it is traditionally the case, H7 closed +€4.50 above Z6. In Chicago, Funds sold 23,500 Corn, 6,000 Soybeans and 4,500 Wheat. It was the CFTC COT cut-off, so over the week, traders are expecting funds to be seller of 13,000 Wheat, 28,000 Corn and buyer of 12,000 Soybeans.
USDA said corn acreage will be -5% below this year to 90M acres and initially forecast a yield of 170.8 bushels per acre (-2.57% from last crop). This goes in contradiction with the speculations on soybeans: traders were betting that there would be some switches from soybeans to corn due to the higher biofuels incorporation. However, this is very early, surfaces can still change, and very clever the one who can forecast a yield when the seeds are still in the bags… They see corn ending stocks next season decreasing by -2.67MT. For soybeans, they peg the acreage to 85.5M acres next season, +2.15% from last season, contradicting again the current speculations… Yield is seen at 47.9 yield per acre (-8.76% from last crop) and ending stocks will be down -0.44MT. All wheat acreage are seen to 48.5M acres (-3.39% from last crop) and yield to 47.1 bushels per acre (-10.46%). Ending stocks are seen down -4.1MT. This is obviously welcomed with the usual scepticism. A lot can happen. Aggregated wheat, corn and soybeans surfaces are supposed to get -4.4M acres lower with a hit on yield… With farmers hit by decreasing price, they have more chance to increase their revenue by expanding the surfaces rather than diminishing the supply taking into account the world is well supplied: not everyone can manipulate the market like OPEC!
Stratégie Grains also tried a guestimates: next wheat EU crop will rebound to 152.9MT on higher yield, exports should also rebound to 30MT. But once again, tough to predict the amount of rain in Q2-2017! Talking about the weather, there will be a bit of rain on winter wheat areas in the US, mostly welcome before dormancy.
Night session is on the rebound, Soybeans are up +4 cents, Corn is a tick shy of being the same, and Wheat is up +3.25 cents in Chicago and movement is similar in Minneapolis and Kansas. MATIF is also up, +€1.00, while CME EU is flat… Actually yet to trade…
GASC was back and that was not really aggressive but still, they bought 240,000T. They had received 10 offers from 9 suppliers, confidence is coming back: 595,000T were offered. Nothing from the US, Nothing from Argentina, nothing from the newly accepted origins (Hungary, Bulgaria, Paraguay), nothing from France and Ukraine. Actually, all offers but two were from Russia, the two other offers were Romanian. Best Russian FOB was $188.74 ($202.28 CNF) and best Romanian FOB was $191.99 ($204.64 CNF). Romanian wheat was too far to compete and GASC bought the 4 best Russian cargoes making an average of $202.4975.
OPEC day is finally there, what a build-up that was… Basically a deal is expected but Iran and Iraq are still reluctant and they are even challenging Saudi Arabia: they accuse to artificially inflate their production in order to make the cut less painful for them, in other words, having higher price thanks to what is clearly white collar and broad daylight market manipulation but without much less to sell. The lesson of this OPEC drama is that OPEC is no more only Saudi. With economies diversifying from oil, with sanction getting lifted, there are now divergences of objectives between OPEC members and Saudi begin to struggle to have everyone in line. Maybe there’s a need to restructure OPEC, especially considering in the top 10 producers, 4 of them are non OPEC (Russia, USA, China and Canada). Either there will be a credible deal and price will rise but US shale gas operators will quickly find some new profitability (and it is the likely solution, Iran welcomed “acceptable proposals”). Either there’s no deal and price will quickly go back below $40. In-between, this could just leave the market trading in the current range: if there’s a deal on the surface but that is not enforced by, for example, Iran, it is likely to have no real long term effect on prices but still will hurt the OPEC credibility. So Iran said they won’t participate and NYMEX Crude fell -3.93% yesterday, and they are less adamant about their inflexibility this morning and it’s retracing almost +5%! Volatile and nervous. NYMEX Crude is back around $47.50 and ICE Brent is trading around $49.50. US Crude Oil Inventories later today expected at +0.7M barrels. On freight, Baltic Dry Index BADI is back up, fuelled by strong demand on largest and mid-size vessels. Index went up +18 to 1,202. Gold is still under pressure, seems like traders are going away from the safe haven: it is currently trading above $1,185 per ounce.
US preliminary quarterly GDP (second estimate) was better than expected to +3.2%! It was expected at +3% and it’s +0.3% above the first estimate. This is the strongest growth since Q3-2014. That being said, the preliminary quarterly GDP Price Index (aka GDP deflator) rose less than expected to +1.4% (+1.5% expected). It has not added additional pressure to the EURUSD, it’s been down quite significantly already and the fact the economy is going better and that the FED will hike the rates in a few days has been anticipated. CB Consumer Confidence was also better than expected to 107.1. Today, German retails sales were excellent, +2.4% month on month, exceeding expectations by a mile (expected to +1% only). Meanwhile, French CPI month on month was flat, it was expected on tick in the deflation side so hey, not that bad, one is used to get satisfied with not a lot in EU! EU CPI were on line: +0.6% year on year (Core CPI was +0.8%). NFP later today expected to 161K. EURUSD is trading between 1.0625 and 1.0650, and GBPUSD around 1.2425.