Morning Comment – #Wheat #Corn #Soybeans – 25/01/2016 …
Market finished mixed on Friday, Soybeans and Meal down while Oil was up, Corn up and Wheat just about on the green side while Kansas and Minneapolis were softer. MATIF finished unchanged on the front moth but the curve was up, a bit of spread action. In Chicago, funds bought 8,000 Corn, 1,000 Wheat and sold 3,500 Soybeans. No huge move last week actually, Corn and SoyOil where the biggest movers, respectively with +1.93% and +2.87% on short covering for Corn and fresh buying for SoyOil (funds increased their long position by more than 20% of their open interest), else week on week this was pretty quiet in the US. But this was a pretty nervous week but no massive volatility, Wheat H6 only went up +0.37% with only 12.75 cents range. CFTC COT was expected to show some short covering and it did: Soybeans funds reduced their short exposure by more than 50%, buying 27,267 lots (reducing their short position to 25,773 lots). Funds actually bought more Corn (28,621 lots), but it was only 15% of their open interest, reducing their short position to still a very decent 158,210 lots. Funds barely moved their position on Wheat, only buying 670 lots (their short position is now 70,458 lots short). This was, as usual, as of Tuesday. It s estimated funds sold 3,000 Soybeans, bought 3,000 Wheat and 7,000 Corn from Wednesday to Friday, bringing the aggregated position to 247,000 lots short.
What is interesting is that over 2 weeks of overall short covering, including a USDA report, only Soybeans and Corn moved up: respectively +1.30% and +3.71%. Wheat was down -0.63%. Winter Wheat seeding bullish momentum seems to have faded and market focus on the fact that world balance sheet is becoming heavier, especially with US exports and EU exports at risk of being decreased again. Every wheat rebound is meeting selling interest and is probably helped by the depressing state of the MATIF on the other side of the pond. For Corn, US balance sheet was heavier and exports are still at risk, so this rebound is probably only short covering. Only Soybeans seems logical with a relatively small up, US and world balance sheet was slightly tighter. However, he likelihood we re heading towards better spring planting seems higher, so it this is not a certainty a long term bullish trend has started. Market would need a really bullish conviction to go up, and so far, this is only short covering with small catalyst but there s no big game changing news expected. MATIF was indeed still in trouble last week, -0.61% in EUR and -1.70% in USD. Record production in France, record production in Europe, lower export demand (French wheat market share at the GASC is so far 11% and was 40% last year), lower freight, This surely explains the panic mod and it s aggravated by the fact French coops and farmers are now in a need of cash. It s official, World Record of Wheat yield was in the UK, in Northumberland, close to the Scottish border: a farmer recorded 16.52T per hectare, this is a staggering 245.64 bushels per acre Feed quality obviously. It would be interesting to see yields corrected with protein content, specific weight or Hagberg falling number to assess the impact of yield on quality in order farmer to select wisely their seeds.
The week has been much more volatile on currencies, oil and financial markets for sure. Euro fell -1.10% on Draghi luring for some more QE in a couple of months. Real, Peso, Ruble, all went down, with Ruble reaching historical lows, Oil ranging from $26.19 to $32.16. Macro concerns are not to be discounted just yet and can full irrationality all over the place.
As usual for a Monday, very quiet night session, a couple of ticks here and there. Wheat is leading the way up, MATIF could follow but EURUSD is rebounding this morning so it s expected mostly flat.