US Labor Day yesterday, markets were closed. To be honest they quite deserved it after a few weeks of being hectic. In Chicago, Soybeans moved down -1.07% during the week, +0.72% for Soybeans and +0.73% for Wheat. Much more nervous in Europe due to the Russian story, MATIF Wheat printed +1.36% in euro last week and +1.39% for London Feed in British Pounds. Markets were opened in Europe and were waiting for the Agriculture meeting in Russia: ban? Tax? Niet! Authorities will continue to monitor the situation. MATIF ended down -€0.75 and London Feed -£1.45.
US Wheat markets woke up reacting more harshly: -11.25 cents for Wheat. Meanwhile, Soybeans are flattish-up and Corn is up +1.25 cent. EU market adjusted this morning and mioved down -€2.00 on MATIF and -£2.00 in London.
The CFTC COT showed funds typically followed the trend: as on a week ending Tuesday Wheat moved down -5.28%, they sold 9,632 lots, decreasing their long position to 51,180 lots. As Corn was down -3.26%, they sold 42,133 lots, increasing their short position to 56,957 lots. As Soybeans were down -4.40%, they sold 13,593 lots, increasing their short position to 53,642 lots. From Wednesday to Friday, a reversal is expected as funds were expected to be buyer of 12,000 lots of Wheat, 14,500 lots of Corn and 5,500 lots of Soybeans.
The current selling on Corn and Soybeans is obviously driven by heavy US crops. The US-China trade war is not impacting the prices so far as China will be well covered of soybeans form Brazil and Argentina. However, situation might be tight in Q1 and China is aiming to become less import dependent by producing 30MT by 2020. Chinese imports from the US are seen down to 0.7MT (from 27.85MT!) so other will step in: Brazil 71.06MT, Argentina 7.47MT, Canada 4.03MT, Russia 1.4MT. There’s a bit of a bluff there, the subliminal message from China to the US is: what are you going to do with an additional 25MT of soybeans?
Japan is seeking 107,965T of food wheat from US and Canada. Syria and Ethiopia are still seeking 200,000T of wheat. Last week, Egypt has purchased 100,000T of Brazilian raw sugar.
Yesterday, UK Manufacturing PMI was worse than expected to 52.8 (53.9 expected). Today, the quarterly inflation report will give a clue about the future rate policy of the BoE. ISM Manufacturing PMI is expected at 57.6. EURUSD is trading down, around 1.1560 while GBPUSD is also trading down, around 1.2825 with GBPEUR fighting with the 1.11 level.