Did I miss anything?

 

Quite some volatility for sure, but the most striking point was for sure the US spring wheat: on the 15th of May, Minneapolis premium to Chicago was an already high 116.75 cents and I do remember telling on a numerous of occasions that a lot of cleaning still needed to happen… Well… It didn’t, did it? Minneapolis premium to Chicago closed at 261.50 cents on Friday (almost $100/T!) and this is far from being the top as during my hibernation Minneapolis topped 816.25 cents with premium being above 275 cents. A picture worth a thousand words, US Drought Monitor in two months and a half is showing an evolution that is clearly explaining the movement. The northern US states (and for sure Canada as well) have been suffering from a severe drought and spring wheat yield and quality are suffering. As per the Midwest, corn farmers are complaining the weather pattern is not good for corn, either too wet, either to dry. Next USDA WASDE will surely shed some light on this.

Drought Monitor

It dragged the whole agricultural complex up with funds switching to heavy long position across the board but the latest USDA WASDE report relieved a bit of the tension. The message was basically: there are quality issues indeed but there are still a lot of grains and the balance sheets are still heavy, much more would be needed to create a clear imbalance. And another report is due this week!

 

On the old crop US balance sheet, nothing major is expected. Average market expectations are indicating +0.457MT on corn and -0.245MT on soybeans. The entertainment will be provided for sure by the new crop and yields should take a hit: on average, it’s expected corn to be at 166.2 bushels per acre (FC Stone, usually reliable, is even betting on worse, at 162.8 bushels per acre) and corn soybeans at 47.5 bushels per acre. The US production is therefore expected to be around 351.9MT of corn and 114.6MT of soybeans, a respective cut from July WASDE of -10.2MT and -1.3MT. This report could right be a market mover, fasten your seatbelts! New crop US stocks could then be cut by -8.2T for corn and -1.0MT for soybeans. US Wheat ending stocks should also suffer, -0.8MT expected, the main contributor would probably be lower harvested acreage on spring wheat.

 

In France, the wheat harvest should finish early (something like 11 days) despite a few showers as the harvest is 91% completed as of Friday. Soft wheat production should be in excess of 36MT. The big question for France will be if the lost market shares will be regained, especially if Black Sea crops are honourable (and it seems to be, once again, the case, not a record but still, FSU will output just below 175MT of wheat and corn). 140MT for the EU soft wheat crop is at risk though and one of the big questions is if the UK, where a deficit is expected, will be net importer indeed.

 

Friday, market ended sideways with no major change, a typical August Friday. Soybeans ended down -1.25 cents, Corn up +3 cents, Wheat -3 cents, Kansas a single tick down, Minneapolis 3 cents up. MATIF just ticked down, CME EU flat line, and UK Feed +£0.75.

 

Funds cut their long position significantly on the last CFTC COT (week ending Tuesday). They sold 22,171 Corn (taking the long back below 100,000 lots to 84,644 lots), 15,660 lots of Wheat (cutting their long position to 12,190 lots) and 11,090 lots of Soybeans (taking their long down to 39,795 lots).

 

On currencies, BoE lost a hawk (my tracker mortgage says ‘thank you’) last week. It reminds the market that there’s still something happening called Brexit and this is creating a lot of uncertainty. There were some talks about raising rates due to inflation growing ‘uncontrollably’, but the June inflation published mid-July was unexpectedly low, 2.6%, and probably killed any appetite to raise the rates as it’s now seen as shooting in the foot. After GBPUSD topped 1.3264 it corrected and now trades just below 1.3050. But looking at GBPEUR is also interesting as there’s a general US dollar weakness bringing some noise. Only 1.1050 for the cross rate! Back to the lows of November 2016 as the shambles of negotiations with EU continues… No major stats today, Industrial German Production is unexpectedly down -1.1% though (expected +0.2%).

 

Have a good week!

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