Wednesday was another day of volatility on the grains and oilseeds markets, especially on Soybeans, closing down -10.25 cents. Interestingly Corn never managed to find a real appetite to go down and Z6 ended flat while the curve was just ticking down. Wheat was down, but in a lower extent and still with some mess on spreads. Chicago ended down -3.50 cents, Kansas down -7.50 cents, the premium to Chicago ended the day at +10.75 cents… And Minneapolis was up +5.25 cents! Premium to Chicago ended up at +159 cents and +148.25 cents to Kansas. This is still due on the fusarium issue in Canada but at some point, premium will be quite unrealistic. MATIF and CME EU settled both +€1: might now become a bit funky as we’re entering the expiry month. In Chicago, funds sold across the board: 6,500 Corn, 9,500 Soybeans and 5,000 Wheat.
But the commodity of the day was without any challenge, Crude Oil. So after a lot of tergiversations and bluff calling. Deal done. Pretty minimalist but it’s been since 2008 that OPEC never cut the supply so market went on fire. NYMEX Crude Oil rebounded +9.31% on OPEC cutting the production by -1.2M barrels per day (40.50% of it is supposed to come from Saudi), this is -3.57% of the supply, -3.57% on a 43% market share, so in other words, world production is hit by -1.54%. View into this perspective, this is pretty low. Is the market movement justified then? As a matter of comparison, in a well-supplied environment, if USDA were to cut global corn production by -1.54%, not sure we’d have a 35 cents rebound, but the comparison is a bit trivial. Back to the OPEC, they are expecting Russia to join the force and cut the production by 600,000 barrels per day. With a market back to $50ish, US Shale Gas operators will be keen on producing more. So really tough to imagine that it is the start of a new bull market and we’ll have time to blink before price are going back to $100 for sure! But the lessons of this deal is that it took 2 years to cook and there is a lot of divergences of opinions in OPEC and the enforceability of the deal is not proven by any means, especially from Iran and Iraq. Bottom line is now, Saudi Arabia is struggling to be the master of the OPEC as the interests of the countries have become different over the years. On top of that, US Crude Oil inventories were expected to show a build-up (+0.7M barrels) and it was finally a withdrawal of -0.9M barrels. NYMEX Crude is currently trading above $51.50 while ICE Brent is just below $54.50 in another day of reacting positively to the OPEC deal. On freight, Baltic Dry Index is back below 1,200 to 1,196. The small downturn is due to lower demand on larger size vessels but it is partially offset with higher demand on mid-size vessels.
Another down day and quite homogenous this time. Soybeans are down -8.25 cents, Corn is down 5.75 cents and Wheat is still following (-9.25 cents, actually leading the pack to be fair) with a lot of spread action as Minneapolis is up +4 cents. MATIF was trading down -€1.75 on the close while CME EU was flat.
US export sales were good for soybeans and wheat to respectively 1,399kT and 483.5kT but corn commitments were slightly disappointing to 761.6kT. In Europe, EU cleared 774kT of soft wheat export licences, barley export reached a very low 37kT.
Saudi Arabia’ SAGO is seeking feed barley, for 960,000T. It’s said that Algeria bought at least 120,000T of Durum. Japan bought 158,514 of food wheat wile… Jordan made no purchase! In Russia, it’s a bit early, but the autumn and approach of the winter are very good for winter grains crops, and SovEcon threw a first estimates of the grain crops to 112.5MT. A lot can happen obviously, but more than 72.5MT of wheat would be very likely then. Australia wheat production is seen increasing to 31MT/32MT. US Weather is seen favourable for winter wheat, bringing a bit of moisture to some part, just on time for the dormancy.
NFP were good yesterday, 216k while only 161k was expected. Chicago PMI was also better than expected to 57.6. Today, US Unemployment Claims were higher than expected to 268k but ISM was higher than expected to 53.2. Overall, the case for the rate hike is definitely there… A couple of weeks to wait! But EURUSD is up anyway, back above 1.06. Anyway, it’s been down quite significantly and expecting another bearish wave before the FED would be greedy. GBPUSD is rebounding also, close to 1,26! More Brexit shambles… Despite a shy UK manufacturing PMI to 53.4, it’s rebounding indeed, with the lack of plan from the government and the legal challenges, one can wonder if Brexit will happen!