Red Sea could be the keyword as yesterday a wave of bearishness pushed the market lower, led by Soybeans again, not only filling the gap, but going the extra mile to test 1,020 cents and finally closing just above, -26.50 cents down. Funds were estimated to be seller of 10,000 Soybeans, this would take their position down to short 167,910 lots, a lot to get rid of if there was a panic movement. Considering the recent highs of 1,080 this is more or less a -5% correction, some might begin to feel the pain. This was driven really by the same topic, the South American weather is getting drier. Corn and Wheat logically followed ending the day down respectively -4.75 cents and -6.50 cents, funds selling 9,000 Corn and 4,000 Wheat. Kansas and Minneapolis were down -8.50 and -8.75 cents on the close: have we started the spreads clean-up? On the other side of the pond, MATIF ended the day down -€2.50 cents on a lack of hope that it will make it to Algeria, and on a slowly growing impression that the next season won’t end the supply glut. CME EU was down only -€1.50, taking its premium to MATIF to +€13.50.
Night session is reverting on Soybeans but only for a shy +2.75 cents. Corn is also higher but for just a tick. Meanwhile, Wheat markets are generally down, more or less -1 cent. MATIF is also down -€0.75, while CME EU is up +€0.75. There’s not a lot of volume but probably a few injuries, especially considering the fact there not a lot of EFP’s so the volume is not physically related.
Finally! After 7 weeks below 1MT, US corn shipment were above, reaching 1,061.9kT. And it’s not because soybeans left more room as they put an end to the 10 week of negative momentum. Indeed, weekly export inspections rebounded to 1,630.6kT for soybeans. Corn are back right on line with the long term seasonal average as 63% of the USDA export target is still to be completed within the next 31 weeks. As per soybeans, a drastic slow down would be necessary for USDA to justify letting soybeans exports unchanged in the WASDE. Indeed, the long term seasonal pattern shows that at this stage of the season, on average 63% of the target is completed. It is currently 70%. In other words, this is something like 3.9MT in front the seasonal trend, so if the seasonal trend is back on, this would be the same amount exported in excess. And worse if the excess pace was to maintain, a trivial calculation could suggest it’s going to be +9.6MT at the end of the season! Very trivial calculation though, the end of the season is going to be for sure much more on line with the average pace, but still, US soybeans exports could end up the season with a number very close to 60MT. Corn and Soybeans need to average respectively 1,149.2kT and 548.6kT per week until the end of their marketing year. As per wheat, there are only 18 weeks remaining to the marketing season and still 9.7MT to export, 541kT per week on average. And with 321.5kT this week, wheat is getting on a slippery slope: 5th week in a row with a number below 0.5MT and actually, the past 10 weeks, there was only one week above 0.5MT. That being said it is still only slightly delayed compared to the average pace and in line with last year, so no huge panic just yet. Indeed, on average at this stage, 64% of the wheat should be exported, it’s currently 63% (it was 63% also last year) and there’s a few hundred thousand tons buffer as this is not including exports from St-Lawrence, exports through trucks, containers, and rail and every destination is subject to a 15kT exemption from inspections.
Also, USDA’s wintertime monthly winter wheat condition report was out: Colorado G/E is down -4% from December to 36% (48% last year), Illinois +5% to 74% (65% last year), Montana +12% to 70% (72% last year), Nebraska +1% to 47% (56%) last year, North Dakota -1% to 82% (65% last year). Oklahoma +8% to 33%, South Dakota +6% to 62% (67% last year) and Texas -12% to 29% (49% last year). Weighting those by the production, it would imply an improvement since December by +0.92% of G/E but it’s -2.62% below last year. Weekly crop report is back in April.
UkrAgroConsult is not worried by winterkill in Ukraine. Temperatures were not colder than -10 degrees Celsius, with the snow layer, there is very little risk of losing some patches on the winter crops.
Japan is seeking 108,442T of food quality wheat from US, Canada and Australia. Algeria deadline for wheat and barley is tomorrow. Wheat prices could be just on the $200 CNF mark. Iraq and Ethiopia still in the pipeline.
On Oil, it seems that market is getting actually more confident that OPEC will keep up its part of the bargain. But anyway, there is still the US and Russian potential troublemakers on the supply side and markets stays in the $50/$55 range: NYMEX Crude is indeed trading around $52.50 and ICE Brent with a bit more than +$2.75 premium. On Freight, Baltic Dry Index BADI is keeping sinking, published yesterday at 816, this is -15.09% year to date. And with Capesize Index already out -3.15% for today, it could just continue…
Not much action on the macro stats yesterday: consumer spending in the US were +0.1% above expectations to +0.5%. Plenty of stats today though. Bank of Japan did not change its policy, still -0.10% rate. They will also keep purchasing Japanese government bonds to keep the 10 year rate at flat, increased their 2016 growth estimate by +0.4% to +1%, +0.2% to +1.5% for 2017 and +0.2% to +1.1% for 2018. Japanese Yen is trading higher, in the lower bound of 113. In EU, French preliminary quarterly GDP came as expected to +0.4%. Monthly consumer spending and Preliminary CPI were pretty bad with respectively -0.8% and -0.2% though. German retail sales were down -0.9% (big miss, +0.6% was expected), while there was a bigger reduction than expected of unemployed people (-26,000 month on month). About Unemployment, Italia Unemployment rate was worse than expecting, topping 12%… Spanish Flash CPI month on month was better than expected at +3%. As per the Eurozone, yearly CPI flash estimates is +1.8% (better than the +1.5% expected), Core CPI +0.9% (as expected) and preliminary quarterly DGP to +0.5% (better than the +0.4% expected). Unemployment rate was also better than expected with ‘only’ 9.6% (9.8% expected). EURUSD mostly welcomed the stats and is trading back up, around 1.0750. Canadian monthly GDP is expected later today at +0.3%. Later today also, Chicago PMI (55.1 expected) and US CB Consumer Confidence (112.6 expected).