Familiar picture yesterday: Soybeans moved down -4.25 cents thanks to the wetter patter in Argentina while the rest was collectively up on poor volumes. Corn ended up +1 cent, Wheat a couple of ticks up  in Chicago while Kansas was more robust with +4.75 cents, ending back being 2 cents at premium to Chicago. Minneapolis was up +3.50 cents. In Chicago, Funds bought 3,000 lots of Corn, 1,000 lots of Wheat and sold 6,000 lots of Soybeans. On the other side of the pond, flat MATIF and +€0.75 on CME EU. Z6 have left the board, we’ll keep an eye on the open interest, it will be a tough season for the contract and if there’s more wheat next year in France, it will more likely ensure its survival, but tough to predict.

 

Night session is flattish on Soybeans and Corn, the holiday mood is building up slowly… Wheat is correcting, no more than -3 cents in both Kansas and Chicago while Minneapolis is ticking up. MATIF is up +€1 and CME EU is ticking up.

 

NOPA Crush later today, expected at 160.1M bushels and as usual, US export commitments.

 

It seems that US seeds sellers are seeing the switch operating from soybeans to corn, some say the extent is 5%. Still very early to assess thought. Time to debate each issue as they turn in indeed, the first issues will be surely winter kill on winter crops! Good thing is market stopped talking about US drought, realising the HRW region is safe, but it surely could become an issue in spring.

 

Hearing a few bird flu stories, in South Korea it seems major (9.81M birds), in France it seems minor but in high scrutiny by the authorities.

 

India is back in the headline. Well maybe they won’t cancel the import duty after all… It’s reported private importers have bought 150,000T of wheat from Ukraine and 50,000T from Russia. Japan bought 122,847T of food wheat from US and Canada. Tunisia has bought 75,000T of milling wheat ($194.18 CNF average), 75,000T of durum ($275.23 CNF average) and 75,000T of feed barley ($178.25 CNF). Tough to have clear view on what happened with the Algerian tender but it’s very likely there will be some risk taken on Argentina but Kansas strength could suggest US wheat also.

 

On the corporate side, Nidera just find a little hole of $150M in its Brazilian accounts. This comes after thy took a hit of $200M from a rogue trader. All thinks come in threes?

 

US Crude Oil Inventories shew a greater withdrawal than expected (the difference between expected and actual is usually pretty big on this data), to -2.6M barrels  (-1.4M barrels expected). This is the 4th weekly withdrawal in a row. Market will keep an eye on US rig count to see if higher prices are slowly triggering some more production. But there is still a bit of scepticism and the excitement of the OPEC and non-OPEC announcement is slowly fading. NYMEX Crude filled his gap yesterday and went back carrying a $50 handle, closing at $51.01. It’s currently trading above $51.25 and ICE Brent at a bit more than $3 premium. On the Ethanol side, production went up +17,000 barrels to 1.04M barrels per day… But everything went to stock and on top of this there was some additional build-up: stocks increased by 546,000 barrels to 19.08M barrels. Needless to say that Ethanol futures felt the pain and were at some point down -6.02% but closed well off from their lows -3.61% day on day. Another scary day on Freight, Baltic Capesize Index BACI lost 16.74%, 11th session in a row on the downside (-49.26% in 11 sessions) and since the yearly highs (18th of October) it lost -57.52%. Baltic Panamax Index BPNI also lost ground with -6.13%, 5 sessions in a row on the downside coming from the yearly high, totalizing -14.89%. So Baltic Dry Index BADI lost -4.66%, that’s -49 to 1,003. BADI did 8 sessions down in a row (-16.28%) and fell -20.21% since its year high (18th of November).

 

They did it. Expecting faster growth despite the lower inflation (1.7% versus their 2% target), FED raised the key short term rates to a range of 0.50% to 0.75% from 0.25% to 0.50%, this is a pretty shy +0.25% but it did not prevent EURUSD to go back to below 1.05 and actually reach a 14 year high (1.0467)!  Indeed, if market is slightly disappointed on the rate hike, the focus on the infamous ‘dot plot’ bring back a bit of excitement. The new ‘sot plot’ smells hawkishness, the most hawkish since a while indeed. The FOMC members are seeing rates between 1.25% and 1.50% in 2017, in other words, this would means 3 rates hike! But on the other side, at some points, just looking at the ‘dot plot’ there were supposed to be 3 rates hike in 2015 and also 3 in 2016. So the usual cautious approach is necessary, when it is about to find excuses not to raise the rates, they are finding them. The market reaction was expectable: US bond yields higher, US dollar higher, stocks lower,… However, one can wonder if this hike is appropriate as inflation is too low: raising the rates could prevent the economy to recover, but on the other side, FED has used the whole pack of ammo there and is confident that inflation will come back gradually and want to avoid any drastic action should inflation explode, with the approach ‘better early than too late’. Yesterday, US Core Retail Sales were up +0.2% (+0.4% expected, Retail Sales were themselves +0.1% versus +0.3% expected), PPI was +0.4% (+0.1%, Core PPI was +0.4% versus +.2% expected). US Industrial production was down -0.4% month on month, worse than the -0.2% expected. Today, also a busy day in macro: French Flash Manufacturing and Services PMI’s were both stronger than expected to respectively 53.5 and 52.6. In Germany it was better on the Manufacturing side (55.5) but below expectations on the Services side (53.8). Same patter than Germany for EU: 54.9 for Manufacturing (above expectations) and 53.1 for Services (below expectations). UK retail sales were in line +0.2%, the Brexit depressed are still going shopping! Later today Philly Fed Manufacturing Index, US CPI, Flash Manufacturing PMI and Unemployment Claims. EURUSD is currently trading around 1.0475 and GBPUSD above 1.2525. GBPEUR cross rate is still in a good shape, just below 1.1950.

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