Uneventful Friday compared to what we’ve recently been used to. Soybeans were down -2.75 cents, Corn up +3.50 cents, Wheat up +4.75 cents in Chicago, +0.75 cents in Kansas and -8 cents in Minneapolis. On the other side of the pond, MATIF and CME EU just ticked up. Funds bought 12,000 lots of Corn, 2,000 lots of Wheat and were even on Soybeans.
Quite interestingly, the best performer of last week was Corn with +3.14% but this was neither irrational or transcendent (pun intended)… Indeed, the previous week, Corn only posted a gain of +0.14% while Soybeans were up +5.18%, failing to follow. Last week Soybeans continued their rally, posting +2.03%, so it was tough for Corn to stay unimpressed for another week. This was Soybeans driven indeed, with the same talks: is Argentina too wet? The extent seems not comparable to last crop and -1.5MT to -4MT is the numbers market are talking about. With a perspective of a good Brazilian crop, and US more price-triggered US plantings, the relief for the farmers might me short lived and this rebound could probably be a good selling opportunity. But stop losses and panic buy could also easily trigger the market to spike to 1,200 by the meantime but that would not reflect what should be the market price in comparison with historical balance sheets and historical prices… But market is always right! Wheat was leaving its own life, Chicago edging higher +0.53% and Kansas and Minneapolis corrected -1.34% and -2.45%. Not surprising. If there are quality issues indeed, it seems there is still a lot of clean-up to do. Kansas closed +2.97% above Chicago (14.75 cents per bushel, or $5.42/T), Minneapolis +32.77% above Chicago (140.25 cents per bushel, or $51.53/T) and +28.94% above Kansas (125.50 cents per bushel, or $46.11/T). Considering the worldwide availability, considering formulations for feed and food, there are surely arbitrages to do around so spreads should eventually normalize. MATIF ended the week higher +0.55% in US dollar, CME EU +0.69% in US dollar and LIFFE Feed +2.76% in US dollar.
On the CFTC’s COT, the end of the life of the cumulated net short of Soybeans, Corn and Wheat was due to happen. As expected, funds increased their long position on Soybeans by +35,632 lots to 131,522 lots. With market being up +5.47% over the CFTC week, this is not surprising. Funds bought more Corn than expected (10,000 lots were estimated), decreasing their short position by 25,179 lots to 51,385 lots (market was up +2.02% by the meantime). And they did not buy Wheat! Although Reuters was expecting funds to have bought 8,500 lots as market was up +1.58% by the meantime, they were actually on the sell side, by a little 49 lots, increasing their short position to 85,017. So if we count well, the cumulative position between the 3 adds up to still short 4,880 lots but from Wednesday Friday, funds are expected to have bought 21,000 Corn, 4,500 Soybeans and Sold 3,000 Wheat, bringing the aggregated position to Long 17,620 lots!
Uneventful week-end with drier forecast in Argentina. Night session is therefore restarting on the downside for Soybeans, -3.50 cents while Corn and Wheat are still asleep: Corn is just ticking down while Wheat is +1.25 cent up in Chicago, -1.25 cents down in Kansas and ticking sideways in Minneapolis. It is still early also for MATIF and CME EU, they are expected flat so far on the open.
Interfax said Russia is to export 35MT to 37MT of grains this season, basically saying that the previous estimates (35MT) is now to be considered as the bottom conservative target.
GASC tender on Friday: 540,000T were offered, including 60,000T from Ukraine which was by the way the best FOB and considering the prices offered from Russia (360,000T, best FOB was $193.5), it was also more competitive CNF. Finally, 60,000T of Romanian wheat was offered at $196.95 FOB but was also out of the league and Ukrainian wheat mad its comeback to Egypt. GASC bought indeed this single vessel at $201.04 CNF.
Still on the tender side, Ethiopia decreased its quantity from 720,000T to 400,000T, deadline is on the 3rd of February. Tough execution as it has to be delivered to inland silos through Djibouti port. South Korea Kocopia bought 60,000T of Corn optional origin at $195.90 CNF. Taiwan Flour Mills bought 93,605T of US wheat of various quality (DNSW 14.5 at $290.30, HRW 12.5 at $249.64, SWW 9 at $204.90 CNF). After managing to buy wheat on Wednesday, Jordan bought feed barley on Thursday! Price is said to be $180 CNF (50,000T) while the second offer was much less competitive ($191 CNF).
Weaker start of the week for oil. OPEC said they are near their target of -1.8M barrels per day cut, but market will want to see the full January production data to trust a bit more. And by the meantime, US Rig Count is increasing at a very good pace, the bigger pace since 4 years, putting bac 29 rigs in operation. US oil and shale gas could indeed give some headache to OPEC… NYMEX Crude is trading just below $53 and ICE Brent has less than $2.50 premium.
Weaker start of the week for US dollar, EURUSD is back above 1.0725 and GBPUSD is back to close to 1.2450. This is not a drastic Trump effect. Tomorrow could be an interesting day with a few PMI’s in EU and the US and also the Supreme Court ruling about the EU membership. Even if the PM Theresa May anticipated the fact the court could force her to go through the Commons, it will be under scrutiny for sure.