Another day of Soybeans back to reality (South America won’t be that bad) with a more pressure added by anticipation of greater US acreage when time to plant will come. But also, there’s a bit of digestion of the CFTC COT: funds bought more than 20,000 lots as market was down on the CFTC’s week (-1.30%). And since then, market has continued to go down and yesterday was the usual cut-off of the COT’s week, Soybeans H7 has lot -1.79%. So some funds will start to feel the pinch, they sold 8,000 lots yesterday and are expected to have sold 16,000 lots on the COT’s week. Soybeans closed down -6.25 cents. Corn did not follow and closed up a cent. The other way around, planting are seen to decrease and it has provided some support and export inspection were very decent. Funds bought 7,500 lots of Corn yesterday are expected to be even on the COT’s week. Finally, Wheat has provided some entertainment, strong US dollar surely did not help and also some funds might think dividing by 2 the short could have been a mistake but market rallying +3.93% during the previous week’s COT has fed their fears. Fund sold 4,000 lots yesterday and 9,500 lots during this week’s COT, as market moved down -3.00%. MATIF ended a couple of ticks down.
Night session was stronger across the board. Soybeans are retracing half of their downside movement, +3.75 cents. Corn is up +1.50 cents and Wheat +2.75 cents, while MATIF is €1.75.
US Export Inspections were decent and unsurprising. Corn seems now well established above 1MT, for the 4th week in a row I’s been above 1MT indeed and reached 1,152.2kT, just above the weekly required proportional split. Soybean momentum is still down, but still above 1MT, and target is 76.47% completed with 28 weeks to go. If the target is not exceeded, it will mean there’s will be a drastic slowdown and a very significant switch from China’s purchase from US to South-America. USDA seems concerned as the exports hasn’t been risen but it’s more to have a conservative flexibility as the target is very likely to be exceeded by up to 5MT. Wheat is back above 0.5MT this week with 558.3kT, 15 weeks to go with 9.52MT remaining to export, this will be the tight challenge of the end of the season.
Speculation and whispers are starting as USDA outlook forum will start in 24 hours. Market clearly sees farmers to switch from corn to soybeans (purely price driven), as corn acreage is seen down -3.7% and soybeans acreage up +4.9%. So that’s a cumulated acreage in progression of 0.6M acres. Spring wheat planting will be also interesting to watch, especially considering premium of Minneapolis wheat.
Good tender activity! Libya is extending the deadline on its tender, probably traders are a bit cold feet in showing offers as execution is seen as tricky. Iraq is back but this time seeking rice, 30,000T. Lowest offer in Tunisian wheat tender is $199.14 CNF. South Korea Kocopia bought 55,000T of corn, likely to be sourced in the US. Japan has once again not received offers in the feed wheat and barley tender, the SBS tender is not captivating international traders… One cannot blame them, adding a middleman means less margin. Taiwan flour mills bought 102,850T of US wheat. And after a nice purchase last week (360,000T), GASC is back again! More or less, only 0.5MT remaining to match the last year quantity. Is that a sign of pessimism on the local crop? More or less compared to last year, the purchase are one month in advance compared to last year, and should GASC purchase today, it could also been in significantly in advance compared to 2 years ago, GASC had purchased more than 5MT. As a reminder, 72% of the wheat booked this season so far was from Russia, 20% from Romania. Only 2 trading companies are above 10% of the supply, Louis Dreyfus (16.98%) and Aston (12.74%). A total of 595,000T were offered, all from Russia but 2 of them (1 Ukraine, and 1… French!). Best FOB is the Ukrainian vessel at $196.50 but has slight freight disadvantage and would come only second in CNF terms ($207.81). Russia best FOB $196 would be indeed the best in CNF terms ($207.35). French vessel offered at $199 FOB, this is $15 above MATIF K6, forget it… Over $212 CNF. A total of 4 vessels are ‘bookable’ below $209 CNF.
Oil is still on the $50/$55 range, on top of it as OPEC has confirmed 100% of the agreed cut will be met soon. NYMEX Crude is trading around $54 and ICE Brent with a $2.25 premium. On Freight, same story, Baltic Dry Index BADI heavily correlated to larger vessels demand. Capesize Index rebounded +20.23% in two days, moving up +6.47% the Baltic Dry Index over the same period, going back above 800 to 806.
On the macro side, German IFO was better than expected to 111 (expected at 109.60, previously 109.8). Eurozone final CPI as expected to +1.8%, Core CPI as expected to +0.9%. EURUSD is trading a tad lower so far today, just above 1.0510. Dollar strength is prevailing. In the UK, the second estimates of the Quarterly GDP exceeded expectation to +0.7% (+0.6% was expected). Overall, the bad Brexit mood has not impacted, so far, the economy… But one has to bear in mind that nothing happened yet formally, the tougher part is still to come, and Jean-Claude Junker warned the UK, the bill will be fat. EU will do everything they can to make a precedent in order to calm down other countries that has a bit of euro-scepticism growing. EU has to find the frontier between hammering the UK, giving them a lesson, but without impacting negatively the EU macro, a political mess for sure. On the other side, the Business Investment went down -1% quarterly, there’s some obvious cautiousness. GBPUSD is trading above 1.2425 and GBPEUR cross rate is has touched 1.19, a new high for 2017.