After the Thursday reversion (-17.50 cents, Soybeans reverted indeed the full Wednesday rebound of +16.25 cents) one could have expect the market to be quieter on Friday as mood was shifting for a longer week end as US will stay closed celebrating George Washington’s birthday (he would have been 285 years old on Wednesday should have he not left us so early). But this wasn’t the case, neither in volume (125,380 lots on Soybeans H7) nor movement (-11.25 cents). Profit taking before a long week-end. Despite rains here and there, the soybean harvest is 19% completed in Brazil, in front of last year (16%) and in front of the 5 year average (12%), with Mato Grosso, the larger state, completed at 44%. There is no report of quality issue due to potential higher moisture, and the 105MT level is still in sight. Also, the second crop plantings for corn is ahead of last year (27% completed, 25% last year, with Mato Grosso at 45% versus 25%). It’s therefore a South American game, if Argentina issues are real, firstly, are they not overestimated, secondly, will Brazil come to the rescue? Market may come back to reality and think that $11-ish Soybeans is not justified by the overall risk. Corn followed with -5.25 cents on Friday, there’s some fears Mexico will shift a significant amount of Supply from US to Brazil and Argentina, which would impact negatively US basis and positively South American basis, but it has also a psychological effect on the market. Wheat was no exception and closed down -6.75 cents, Wheat had no genuine reason to rebound that much the past couple of weeks other than following the general bullish momentum: winter kill in Western Europe, Eastern Europe and Black Sea has not materialised, US higher temperatures thinned the snow layer but there’s no real issue at the moment and all the risk are actually ‘what if’ scenarios. Also very interestingly in Wheat, Kansas premium to Chicago reached 15.25 cents, and Minneapolis premium to Kansas reduced to 90 cents. Is this the start of normalization and physical arbitrages?  In Chicago, funds sold 9,000 Corn, 9,000 Soybeans and 4,000 Wheat. On the other side of the pond, MATIF went down -€1.00 and CME EU -€1.50, the latter still having a premium of €6.25 to MATIF.

 

A two sided week that started well overall and finished with a nice little selloff on Thursday and Friday. RCG wrote, specifically for Wheat, “Hero to Goat in a flash”, it’s a pretty fair description of what happened. Chicago Wheat corrected -1.78%, Kansas -0.92% and Minneapolis, finally, -4.59%. MATIF Wheat printed -0.40% in US dollar, resisting actually pretty well but market has been really dull recently, CME EU -2.18% in US dollar and London Feed -1.36% in US dollar. The whole soy complex was down with Soybeans -2.50%, Meal -0.73% and Oil -4.97%. ICE Canola was down -2.06% in US dollar while MATIF Rapeseed resisted and was the only one showing some green: +0.10% in US dollar. Corn ended the week down -1.67% in Chicago and -1.26% in US dollar in MATIF. No major weekly move on currencies: EURUSD -0.25%, GBPUSD -0.62%, USDCAD +0.15%.

 

Funds were naturally expected to have purchased like crazy. Grand slam, they bought all grains, without exception: Corn 56,527 lots, What 42,500 lots, Soybeans 20,354 lots, Kansas 9,817 lots, Minneapolis 900 lots, SoyOil 5,766 lots and Meal 5,762 lots. There’s not a lot of selling in the CFTC COT report! There are some talks about fresh asset reallocation, are funds moving from equities to commodities? Some say equities are a ticking bomb… And a lot of funds having long only model this could explain. To see some selling, one has to look at heating oil (seasonal move), NatGas (US Shale Gas operators are drilling like crazy as they added 11 rigs drilling last week) and soft commodities (Coffee, Sugar, Cocoa). Anyway, funds increased their long to 85,360 lots on Corn, to 170,668 lots on Soybeans and decrease their short to 40,047 lots on Wheat: the tree of them aggregated is 215,981 lots… One thing to note from this COT is that market was estimating less funds buying as Reuters estimated 21,000 for Wheat, 8,000 for Corn and 4,000 for Soybeans. Could create a fun wakeup call when market reopens! Anyway, this was as of Tuesday and misses the fun at the end of the week, funds are expected to have sold, from Wednesday to Friday, 5,500 lots of Wheat, 7,500 lots of Corn and 8,000 lots of Soybeans, but who know…

 

MATIF is open today and is expected mostly flat today but could feel a bit of pressure as it’s been resisting pretty well compared to Chicago in the past couple of days.

 

Egypt GASC was in for Wheat and received 535,000T of offers including 55,000T of US wheat (optional SRW, HRW at $208 FOB, no chance) and, French wheat! At $201 it was not competitive (more or less $9 over MATIF) but it means there’s still a bit of milling wheat available. The rest offered were the obvious: Russian (best FOB $195), Romanian (best FOB $197.98) and Ukrainian (best FOB $196.54). GASC booked 360,000T at an average of $207.225 CNF, including 240,000T of Russian wheat at $206.725 CNF average, 60,000T of Ukrainian wheat at $208.10 average, and 60,000T of Romanian wheat at $208.35 average. Russia is still obviously the major winner in GASC tenders, having been booked for 72% of the total quantity this season, followed by Romania (20%), Ukraine (6%) and Argentina (3%). French wheat will struggle taking back some market share for sure, and Black Sea could disrupt significantly on a long term basis well established international flows… And this will maybe give idea to other big importers like Algeria…

gasc-mar

GASC is back in after cancelling the vegetable oil tenders: they are seeking for 25,000T of soybean oil and 10,000T of sunflower oil. Iraq tender deadline is on the 26th of February but the inspection at destination port is making traders a bit cold feet. Also, spec is still US, Canadian and Australian wheat but last time some Black Sea wheat was offered…  Last week, Algeria bought 50,000T of feed barley and 200,000T of durum around $262 according to Bloomberg and Reuters, but it’s always tough to know as there is no official communication.

 

Oil is still ranging despite US stocks raising and US Shale gas operators drilling like if there was no tomorrow. NYMEX Crude is currently trading above $53.50 and ICE Brent with a $2.45 premium. On Freight, Baltic Dry Index BADI ended the week with a sharp rebound! It’s back up to 741. It’s driven by a few fixtures on larger size vessels: Capesize index rose by +11.51% on Thursday and +19.19% on Friday.

 

No major stats today on the macro side. Tomorrow French, German, Eurozone and US PMI’s will probably give the kick off for currencies as the week is starting very gently: EURUSD is a few pips up, trading around 1.0620 and same extent for GBPUSD, trading around 1.2430.

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