A scattered Friday that was. Soybeans down a couple of ticks, Corn down -4 cents Wheat up +5 cents in Chicago, +4 cents in Kansas and only +0.75 cent in Minneapolis. The main point of talks were weather worries on winter crops in the US and Europe. Kansas ended the week at +6.25 premium to Chicago while Minneapolis ended the week at +122,25 cents premium to Chicago and +116 cents to Kansas. If everything was going well, a lot of clean-up would be needed on spreads but week-end events could change the perspective… In Chicago, funds bought 2,500 Wheat and sold 9,000 Corn and 2,000 Soybeans. On the other side of the pond, MATIF was flat and CME EU up +€1. In MATIF the K7/U7 spread ended the week at -€0.50, this is a tiny contango considering it is the old crop new crop spread!
CFTC’s COT showed funds kept selling outrageously but the fun stopped on Tuesday as usual and we’re probably not going to see this next week! Funds sold more Wheat than expected (20,201 lots while 12,000 only were expected) and increased their short position to 162,327 lots. They were expected to have bought Corn and Soybeans(respectively 14,500 lots and 10,000 lots) but they actually sold as well, respectively 24,448 lots and 2,447 lots, increasing their respective short to respectively 196,257 lots and 48,275 lots, this is an aggregated short of 406,859 lots! D’ho! The Big Short that is… Especially considering the week end development, this would be a genuine catalyst for short covering and could create a fireworks! Form Wednesday to Friday, funds are expected to have purchased 8,500 lots of Wheat and continue to sell Corn and Soybeans for 14,500 lots and 8,000 lots. But this will change today and tomorrow for sure!
This was definitely a ‘wheat week’. Chicago was up +3.33%, Kansas +5.01%, Minneapolis +2.71%, MATIF Wheat +5.17% in US dollar, CME EU +2.96% in US dollar, London Feed +3.20% in US dollar. There was every single possible issue raised on winter crops, either in the US and Europe: too dry, too cold, too wet, not sunny enough, snow, overnight freezing. Considering the amount of short, it’s not a big surprise to see short covering and market rebounding.
And the week-end could not have been worse for that matter. If it was a bit of an unnecessary drama before, now it’s tough to ignore the situation in the US as snow and storms came back and crazy pictures are doing the rounds, very unusual landscapes for a 1st of May! Winter crops completely covered in snow, cattle dying, newly planted spring crops under water. So market is in fire this morning! Night session is up +9.25 cents on Chicago, +11.75 cents in Kansas and +8.50 cents in Minneapolis. While MATIF U7 has opened stronger as well, trading up +€1.50.
The good thing is the Drought Monitor is now pretty good, 78.33% (+5.29% week on week) of the surfaces are not drought impacted and at the start of the season it was said that it could not be better than last year, it is now better: last year the unaffected areas were 60.36%. But to be fair, California, Nevada, Arizona and New Mexico were accounting for the most and if we compare the more interesting areas as far as grains are concerned, the South is still not as good as last year. But if no drought means flood and snow, this is not good either…
Quickly back to the last week movements, Soybeans were down -0.60%, SoyMeal up +0.68%, ICE Canola down -3.72% in US dollar, MATIF Rapeseed up +5.85% (on freezing fears), Corn was up +0.28% and MATIF Corn +1.14% in US dollar. EURUSD was up +1.58%, GBPUSD up +1.05% and USDCAD up +1.13%. Everything is also up this morning… Notably, Soybeans are up +5 cents, Corn up +5.50 cents.
Tonight crop ratings and progress will be monitored closely for sure, there is also the Wheat Quality Council tour, it could not come at a more (in)convenient time! Also export inspections today.
Philippines is seeking for 55,000T of feed wheat.
Crude Oil is trading just above $49 on the NYMEX while ICE Brent is at $2.70 premium. No real change of the situation: there is still a supply glut, even with the OPEC deal, so should It be extended this month probably won’t change a lot. Less supply ore more demand is needed. On Freight, the week ended on a negative note across all vessel sizes, with main index (Baltic Dry Index) down -2.20%. It seems to be structural as Panamax rates are now following Capesize rates on the downside.
ISM Manufacturing PMI is the main data today, expected at 56.6. EURUSD is still pretty high, just below 1.09 as it is widely expected the pro-Europe candidate to win the French elections. Nothing much otherwise.