A quite dull Friday that was, Soybeans just ticked up, Corn was up +1.25 cents and Wheat +0.75 cent. The only excitement came from Minneapolis -5.25 cents and MATIF -€1, most probably correcting previous excess. On Friday in Chicago, funds bought 4,500 Corn and 1,500 Wheat while the sold 2,000 Soybeans.
The week is easy to sum up. A Monday dip followed by a rally on the biofuels speculation and traffic jams in Brazil. But at the end of the week it really seemed the rally was lacking of conviction, but markets ended the week posting weekly gains. This came in addition to the fact there is some concerns of drought in the US and spring planting could be done in far from optimal conditions. If we’re looking at the end of February since the 2012 ‘popcorn’ crop, firstly, this would be greedy to expect better than last year were conditions were absolutely optimal, then, it doesn’t look that bad compared to 2012, 2013, 2014 and 2015. So keeping an eye on it, for sure, speculating about the spring crops that are not even planted might be however a bit early. Also, the position of concerning areas could be much worse. On a good note, California crops will likely have a better year: a good year for almonds, grapes, lettuce, strawberries, tomatoes and walnuts!
As per the biofuels story, it is still at the stage of the denial and considering the plan of President Trump to cut climate programs at EPA and NOAA, this is a believable denial. The only reason it could happen would be unrelated to climate, to find a new market to US corn, but in the absence of a trade war on the export side, this is not a priority. A story to follow for sure. As per the logistic issues in Brazil, it doesn’t seem to be much worse than every year and as long as a consistent flow of soybeans are reaching the ports, there is no real issue.
Anyway, Soybeans printed a +1.29% increase last week, Corn +2.70% and Wheat +1.23% in Chicago and +1.02% in Kansas. But interestingly, Minneapolis went down -1.08%. Is the party over? The US Spring Wheat areas aren’t suffering from rain deficit and there’s no issue either in Canada. A more normal phytosanitary situation on the next crop should solve the issue and premium should normalize. Minneapolis ended the week at 76 cents premium to Kansas and 94.25 cents to Chicago, this is quite far from the highs during the previous months. On the other side of the pond, MATIF Wheat rebounded +2.09% in US dollar, following US market and getting a bit excited about French wheat making its entry to the GASC book.
CFTC’s COT showed that across the board funds sold more than expected. Indeed, Reuters was putting funds seller of 1,500 lots of Wheat 3,000 lots of Corn and 2,000 lots of Soybeans but fund actually sold 28,081 lots of Wheat (increasing their short position to 55,466 lots), 10,081 lots of Corn (decreasing their long position to 82,135 lots) and 22,731 lots of Soybeans (decreasing their long position to 131,576 lots). The behaviour was different, funds sold Wheat and Corn following the trend as Wheat and Corn respectively went down -2.69% and -1.19% on the COT week while Soybeans were actually up +0.22%. It’s expected that funds bought 5,500 lots of Wheat and 10,500 lots of Corn from Wednesday to Friday, while they were still on the sell side of Soybeans for 1,500 lots.
Night session is on the upside across the board. If Corn is quiet (+1.25 cents), Soybeans and Wheat are sharply up for an early Monday, respectively +7.25 cents and +5.50 cents. A bit of reaction to the COT as analyst were surprised by the extent of selling on Wheat and Soybeans. MATIF is expected to follow, ticking up on the opening. If there will be speculation around biofuels, weather and logistic issues in Brazil but Thursday might be the day the fundamental matters as there will the monthly USDA WASDE release.
EU Soft Wheat production is seen to recover from the last year issue: European Commission sees a crop at 143MT, up from 134.4MT, with French crop back in a more normal range (36.2MT expected). Should it happen, EU would be back on the exports, soft wheat exports are seen raising indeed by +4.9MT to 28.9MT. Also on the next crop, barley is seen up +5% to 62.7MT, corn up +10.3% to 66.6MT, durum -2.2% to 8.8MT and rapeseed up +10.6% to 22.1MT (Stratégie Grains sees 21.58MT).
In Brazil, the second corn crop is getting planted nicely, 80% of the crop is planted, +7% ahead of the average.
Turkey is seeking for 130,00T of EU milling wheat, deadline is 8h of March for 2nd half of March shipment. Philippines’ buyers are looking to buy 165,000T of feed wheat for May, June and July, deadline 7th of March. Jordan is still pending (almost perpetually anyway) to buy 100,000T of hard wheat, and 150,000T of feed barley but they always struggle due to tough tender terms.
Oil is retreating this morning but nothing new, still desperately stuck in the $50/$55 range: NYMEX Crude is trading above $52.75 and ICE Brent with a $2.55 premium. But on Freight, two days of sharp increase in Capesize Index combined with steady Panamax Index (8 sessions in a row on the upside) brought Baltic Dry Index BADI up back to close to 1,000, ending +35 up on Friday to +3.87%.
Friday night, Janet Yellen gave a serious clue about what will happen in the next FOMC. Market is now widely expecting the interest rates to be increased, it’s now priced at 79.7%. In other words, a status-quo would disappoint the market: answer on the 15th of March. Before she spoke at the Executive Club of Chicago, ISM Non-Manufacturing exceeded expectations to 57.6. On Thursday, Unemployment Claim were better than expected (lower then) to 223k. But EURUSD retraced a 3 days dip on Friday, closing above 1.06. Typical buying the rumour sell the fact (the other way around actually!). EURUSD is starting the week on a lower note but is still trading around 1.06. On Friday, UK Services PMI was lower than expected to 53.3 and GBPUSD seems now well established below 1.23 as it keeps failing to recover. There’s still a big uncertainty of what will happen on the Brexit side, how and when. GPBUSD is trading lower this morning, around 1.2275.