Last week was surely driven by the US dollar and the Wheat intermarket spreads. EURUSD fell -1.06% dollar week on week and the move was obviously generalised on the US dollar strength: GBPUSD -0.69%, USDCAD +1.18%, AUDUSD -1.97%. The long awaited FED decision to hike the rate was the clear driver. On the Wheat side, still a huge mess as Chicago was down -1.68%, Kansas up +0.30% and Minneapolis up +1.49%. On the other side of the pond, MATIF was up +0.28% in US dollar, CME EU and LIFFE Feed respectively down -0.49% and -0.32% in US dollar. Corn was down -0.90% over the week, MATIF followed in the same extent in US dollar. Soybean complex has been a bit shaky but on a weekly perspective it doesn’t tell the whole story as Soybeans were down -0.07% only, SoyMeal -0.53% and SoyOil -0.54%. Finally, ICE Canola was down -1.27% and MATIF Rapeseed +0.20% both in US dollar terms.

 

It’s the time of the year were it can be a bit dull in terms of fundamental news. South America is providing a bit of the entertainment due to the dryness but it seems things are getting back to a much more normal pattern. Meanwhile, Safras & Mercado said the soybean crop will be a record 106.1MT, this is to compare with the 102MT for USDA. There is still some potential for the balance sheet to become heavier. With a word crop close to 340MT and stocks close to 25% of the production, one can then wonder if soybeans are not overvalued. But on the other side, total consumption is close to 98% of the crop, so a change of supply or demand can quickly have an impact. But if we (randomly) go back 10 years ago, the 06/07 crop was 237.33MT, ending stocks 26.41% of the production and the use was 94.92%… And Soybeans were below 700 cents. Also, there are the usual season’s greetings from the US farmers: winter kill, record cold! As usual, it is to be taken cautiously. Actually, the drought may be at this stage more concerning for spring plantings rather than the cold for winter crops, areas are covered by a decent layer of snow.

 

CFTC’s COT shew not much movement on Corn and Soybeans: funds sold 1,415 lots of Corn, reducing their short position to 74,007 lots. They sold 1,898 lots of Soybeans, decreasing their long to 120,750 lots. Reuters had estimated funds were even on Corn (no big miss there) but seller of 16,500 lots on Soybeans, so the sold much less than expected but did not prevent the market to go down 2.00% on the COT week. Main movement was on Wheat, funds bought 22,991 lots (Reuters was expecting only 8,000 lots) reducing their short position to 92,929 lots. As of Friday, the cumulated position of Wheat, Corn and Soybeans is below 50,000 lots.

 

The week is starting quietly, no massive rebound on Wheat, discounting the actual fears of early winter kill (end of autumn kill). Wheat is up a couple of cents across the board while MATIF is quiet, just ticking up and CME EU still to trade. Corn is down a couple of cents while Soybeans are correcting their Friday movement with -5 cents. After very strong US export sales, market will surely have an eye on the inspections, bearing in mind US exports could, should, will, be increased, but is this in the detriment of Corn but most dangerously of wheat?

 

EURUS is weaker to start the week trading above 1.0425. GBPUSD also down, trading around 1.24 (up and above), while the cross rate GBPEUR went below 1.19. January is definitely going to be an interesting month for euro and British Pound as we’ll have a better view of what’s going to happen in the House of Commons. Some surprise could come despite the fact MP’s are claiming, even if they disagree, that the result of the referendum should be ultimately enforced.

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