Friday was another stronger day: Soybeans (Q8) moved up +38.25 cents quite technical there, it moved down significantly the past few weeks. Corn and Wheat (U8 contracts) were up also, Corn +8.00 cents, Wheat +9.75 cents in Chicago, +9.75 cents both in Kansas and Minneapolis. Minneapolis premium is now a mere 43 cents to Chicago and 45.25 cents to Kansas. In Europe, MATIF Wheat was down -€1.50 and London Feed +£0.15. In Chicago, funds bought 16,000 Corn, 16,500 Soybeans and 5,000 Wheat.
CFTC COT is delayed till tonight, will be quite obsolete but over the week ending last Tuesday funds were expected to be seller of 14,000 Corn, 16,000 Soybeans and buyer of 9,500 Wheat. From Wednesday to Friday, buyers across the board of 13,500 Wheat, 17,000 Corn and 11,500 Soybeans. In other words, Wheat could be back to long on COT ending tomorrow.
Week started on a softer note: -6.50 cents for Soybeans, -3.25 cents for Corn and -3.25 cents for Wheat in Chicago. MATIF ticking a couple of ticks up on the front month though, while London Wheat is still strong: +£0.60.
Saudi has bought 1.7MT of barley at an average $226.47 CNF. Jordan cancelled a tender to buy 120,000T of wheat. When will they learn? They have reissued the tender.
This was a week driven by the sunlight and temperatures: strong and up! It is difficult to know for sure what the global impact is. But harvest has started and it should bring some answers pretty soon. If the US Drought Monitor is looking red, the extreme situation is at the junction of Utah, Colorado, New Mexico and Arizona. This is 5.83% of the planted wheat and 2.63% of the total major crops. So focusing on this could be quite irrelevant. Texas is dry but extreme situations are very localized, and Midwest situation is actually pretty normal. In Western Europe, Scandinavia and Black Sea this is more concerning. Stratégie Grains put its reputation at stake by cutting the French crop by an outstanding -4MT as harvest is kicking off. First reports from Russia could suggest USDA WASDE is over pessimistic. Harvest is early: 15MT are harvested already (1.2MT this time last year) and yields seems to be -17% from last year, in other trivial words, crop is still in line to post 70.5MT while USDA is expecting 68.5MT. Not long now to end up all the speculation.
But obviously, markets were higher over last week: Wheat was up +2.79% in Chicago, +5.02% in Kansas, +4.01% in Minneapolis. On the other side of the Pond, MATIF was up +4.13% in US dollar (with EURUSD up +0.53%) and London Feed +6.07% in US dollar (with USDGBP up +0.58%). Corn and Soybeans followed: Corn was up +0.21% in Chicago and +4.64% on MATIF in US dollar. Soybeans were up +1.62%, SoyMeal +2.15% but SoyOil was lower, the only market lower actually, -0.72%. Finally ICE Canola was up +0.74% in US dollar (with USDCAD down -0.38%), MATIF Rapeseed up +1.51% in US dollar, NYMEX Crude Oil -0.47% and ICE Brent -2.93%.
Last week, CME pulled the plug on the EU Wheat Contract. Quietly. Without ceremony. It was widely expected, idea was good and needed by the French market, but faced reluctance by French operators, and most probably some little arrangements between friends on the few first delivery, and basically killed the trust. It is not a huge blow as on the other side, it seems the Black Sea swap is working rather well. It challenged Euronext for sure and they seem to be keen on increasing storage capacity at port (west coast!) as well as creating a warrant system for inland silos. Also, a durum wheat contract or a feed barley contract could see the light. The latter contract would have better chance of success: the malting barley contract showed that high quality contract aren’t working, as sometimes too niche. Durum is very niche compared to soft wheat for sure. But feed barley is potentially a good idea to finally enable some proper indexation of malting barley but feed barley is still very often indexed versus wheat and is still a smaller market.
Big news of the morning is David Davis, Brexit Minister, resigning. After endorsing the government plan (for a softer Brexit), one understood it was actually reluctantly. In the dead of Sunday night, he resigned (after a couple of pints?). Who’s next? Boris Johnson has no other alternative if he wants to be one day (closer than PM Theresa May expects) but to resign, after telling the plan was a “stud”. His credibility and future is at stake… But PM is at stake as well. With 2 senior minister showing the middle finger, it will be difficult not to trigger a leadership context. Will she try to give them a lesson and call an election to leave labour deal with… The “stud”? Snare drum is rolling! GBPUSD cannot care less and is trading up this morning, above 1.3335. EURUS is up trading around 1.1765. GBPEUR cross rate is up also, trading above 1.1335. Sentix Investor Confidence was better than expected to 12.1, no major stat today. But tomorrow, UK GDP, UK Manufacturing Production and German ZEW!