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London Morning Grains Weekly Commentary

By: William Rutherford-Roberts, Agricultural & Softs Analyst, Market Analysis EMEA

London Grains & Oilseeds Weekly Commentary
 
William Rutherford-Roberts
+44 (0) 203 580 6215
Headlines

The wheat market recorded a mixed bag of moves through the past week, with Paris recording notable losses driven by improving expectations of an extension to the grain corridor alongside a sharp rally in the euro which has driven the front month contract to a 10 week low amid the contract gapping lower yesterday following positively interpreted comments made by Russian officials at the G-20 summit. Chicago, on the other hand, managed to settle the week unchanged amid a weaker dollar and strong technical support around the $8 level (basis December). The market has seen a number of tenders issued through the past week, among them Egypt (although this was cancelled and a private purchase of Russian origin was made) and Saudi Arabia. Weaker than expected inflation data spurred sharp losses in the dollar aiding the U.S. markets. The market remains susceptible to headline risk with the missile strike reported on the Polish border yesterday evening spurring Chicago higher after the Paris close. Chicago returns much of those gains this morning following comments from President Biden that NATO officials do not believe the strike to have originated from Russia. 
The soybean market has recorded some volatile moves through the past week, but continues to reverberate around its 200-day MA. Yesterday’s NOPA crush came in as expected at 184.5MBu with the crush on track to meet the USDA forecast. Bean oil stocks increased M/M but declined by approximately 306 mln lb Y/Y while domestic usage increased Y/Y and came in above the 5 yr average. The rapeseed complex, like wheat, has experienced notable currency pressure through the past week and settled at its weakest since late September yesterday. Improving planting expectations for Europe also provide headwinds to the complex. 

WHAT TO LOOK OUT FOR IN THE WEEK AHEAD
  • EIA weekly US ethanol inventories & production data due today.
  • International Grains Council Monthly Report due Thursday.
  • China’s second batch of October trade data, including corn, pork and wheat imports due Thursday.
  • Export sales report due Thursday.
  • FranceAgrimer weekly crop conditions update due Friday.
  • Commitment of Traders report due Friday.
Matif Wheat

Matif: December 22 change on week (Tuesday to Tuesday) -3.2%. 
Paris records another weekly loss, with signs of improving inflation acting to improve the euro’s position against the dollar and subsequently weigh on the euro denominated commodities.
This was coupled with the improving sentiment around the Ukrainian grain corridor which is now generally expected to be extended, with comments coming out of the G-20 summit indicating the UN is working towards finalising an extension. The Russia Foreign Minister, Sergei Lavrov, stated yesterday that the UN has pledged to meet Russia’s conditions for an extension, which include not using the corridor for military purposes and enabling full movement of Russian grains and fertilisers.

image 55481
 
 MonthSettWeekly ChangeOIW/W Change in OI
DEC 22316.5-12.5158,26735197
MAR 23315.0-14.25148,63411313
MAY 23313.5-1564,80792
SEP 23297.3-14.2556,333507
DEC 23297.3-14.7551,899-1435
MAR 24297.0-151,794324
MAY 24298.5-14.25404150
SEP 24272.0-12.568617
DEC 24273.8-11.2564519
Source: Euronext & Bloomberg
 

There has been some reporting that this would mean state owned banks like Rosselkhozbank could potentially accept SWIFT payments, although there is no full confirmation on this. Russia has stated that it will make an announcement on the grain deal “at the appropriate time”, this potentially meaning Russia could continue to command uncertainty over the fate of the deal if it wished.

London Wheat

Change: May 23 lost 4.8% through the past week.
Losses in London have outweighed those recorded in Paris through the past week. The factors outlined in the previous section carry into the London market, with a stronger pound hurting the attractiveness of UK wheat to importers. Further pressure also comes from the spread of Avian Flu which is resulting in a very high number of birds being put to slaughter. Indeed Reuters reported yesterday that some UK supermarkets have resorted to rationing eggs, reflecting the shortage of chickens. Growing fears over a shortage of turkeys over the Christmas period are gaining momentum. This has obvious implications for the UK’s feed wheat demand. In turn UK Feed Wheat futures have found greater downward pressure in the past week as the virus spreads.

image 55485
 MonthSettWeekly ChangeOIW/W Change in OI
NOV 22251.6-13.525-10
JAN 23255.5-13.4510
MAR 23259.4-13.4110
MAY 23259.0-17.756,650136
JUL 23255.7-14.10-
NOV 23240.0-19.13,356233
JAN 24250.3-15.350-
MAR 24254.3-14.250-
MAY 24255.7-11.350-
Source: ICE & Bloomberg
Black Sea

Black Sea (most active) moves 0.5% W/W.
The Grain Corridor continues to be the main area of focus for the wheat markets, with yesterday’s events reminding us that headline risk remains the largest contributing factor to volatile moves.
Much of the downside has come from the ongoing improvement in sentiment over the grain corridor’s extension but recent tenders have demonstrated to the market that Russian origin remains desirable with both Algeria and Egypt (albeit privately) having purchased Russian origin in recent weeks. Indeed, FOB quotes have held ground following gains last week, indicating the maintained competitive strength found in Novorossiysk.  Indeed, Russian wheat remains at a notable discount to French origin for example despite the recent moves to the downside found in Paris. 

 

image 55487
 MonthLastWeekly ChangeOIW/W Change in OI
NOV 22317.50.50-
DEC 22318.31.52000
JAN 23319.51.250-
FEB 23321.310-
MAR 23323.000-
APR 23323.30.250-
MAY 23317.02.50-
JUN 23306.32.50-
JUL 23299.32.50-
Source: Platts & Bloomberg
Russian officials have reported in recent days that it has exported 13.4Mt of wheat with the forecast for total shipments at 50Mt. Ukrainian shipments continue to run well behind last year with just under 6.0Mt shipped, a decline of approximately 55% Y/Y.
Oilseeds

November rapeseed fell by 4.3% W/W, marking a second consecutive week of declines surpassing 4%. Currency strength weighs on the complex, as it has on wheat while improving prospects for next year’s crop ease supply concerns. 
Soybeans recorded a small move to the upside W/W (0.7%), with the Jan contract continuing to hold around its 200-day MA.  Yesterday’s NOPA crush came in as expected, with stocks of bean oil falling against last year with steady to slightly increasing domestic demand. 
Palm Oil has hit a two week low as losses in soybean oil today carry into the wider vegoils. Pressure from a stronger ringgit also weighs on palm oil.

 

image 55488
 MonthSettWeekly ChangeOIW/W Change in OI
FEB 23611.5-32.558,9453627
MAY 23611.8-3027,9512519
AUG 23610.5-2918,721221
NOV 23612.0-27.53,753279
FEB 24608.3-20.5650
MAY 24592.0-38140
AUG 24553.3-27.50-
NOV 24498.5-27.50-
FEB 25486.5-27.50-

Source: Platts & Bloomberg

 

Arb Commentary 

Overall, the Chicago Paris spread narrowed only slightly W/W with an essentially horizontal trend in Chicago contrasting the losses in Paris. Those losses were slightly offset by gains in the euro, limiting the losses in dollar terms. 
The Kansas-Paris spread widened by approximately $7.80 W/W, with gains in the Kansas market strengthening its premium against Paris. The condition of the winter wheat crop in Kansas and other states remains a concerning one, with a recorded decline in conditions Kansas, Nebraska and South Dakota, states where the good to excellent ratio was already below 25%.

Trade Data

EU soft wheat exports stand at 13.35Mt, up from 12.19Mt Y/Y. Rapeseed imports total 2.6Mt, up from 1.9Mt Y/U
Wheat export sales totalled 151.5Kt, bringing cumulative shipments to 9.0Mt, essentially unchanged Y/Y. Corn sales stood at 259.4Kt, to total 4.4Mt for the 22/23 marketing year, down from 6.6Mt Y/Y. Soybean shipments totalled 2.8Kt, bringing cumulative exports to 12.6Mt, down from 14.2Mt Y/Y.
Ukrainian wheat exports stand at just under 6.0Mt, down from  13.2Mt.

image 55489
image 55490
image 55491
 
Sources: EU Commission, Federal Center of Quality & Safety Assurance for Grain and Grain Products, USDA,& Ukrainian Economy Ministry
 
Weather
image 55492
 
image 55493
 
image 55494
 
image 55495
 
Source: Ag Weather

Commitment of Trader Managed Money Positions

 

 

 CBOT Wheat Futures + Options
 Net PositionNet W/W ChangeLifetime HighLifetime Low
08/11/2022-42,902-5,75380,827-162,327
01/11/2022-37,149-1,097
25/10/2022-36,052-14,001
18/10/2022-22,051-2,549
11/10/2022-19,502-7,283
     
 MGE CBOT Wheat Futures & Option
 Net PositionNet W/W ChangeLifetime HighLifetime Low
08/11/20223,055-75919,867-25,401
01/11/20223,814331
25/10/20223,483-326
18/10/20223,809-307
11/10/20224,116328
     
 CBOT Corn Futures + Option
 Net PositionNet W/W ChangeLifetime HighLifetime Low
08/11/2022237,662-34,298429,189-322,215
01/11/2022271,9607,586
25/10/2022264,37410,113
18/10/2022254,261-13,116
11/10/2022267,37723,649
     
 CBOT Soybean Meal Futures & Options
 Net PositionNet W/W ChangeLifetime HighLifetime Low
08/11/202295,4202,003120,631280
01/11/202293,4177,387
25/10/202286,03015,233
18/10/202270,797408
11/10/202270,389-9,311
 KCB Wheat Futures + Options
 Net PositionNet W/W ChangeLifetime HighLifetime Low
08/11/202224,4331,02573,111-58,866
01/11/202223,408-1,218
25/10/202224,626-1,644
18/10/202226,270-238
11/10/202226,508877
     
 CBOT Soybean Futures + Options
 Net PositionNet W/W ChangeLifetime HighLifetime Low
08/11/2022103,9082,579253,889-168,835
01/11/2022101,32925,918
25/10/202275,4118,549
18/10/202266,8621,124
11/10/202265,738-11,750
     
 CBOT Soybean Oil Futures + Options
 Net PositionNet W/W ChangeLifetime HighLifetime Low
08/11/2022105,2105,092126,543-109,950
01/11/2022100,1184,957
25/10/202295,16120,187
18/10/202274,97413,990
11/10/202260,984-1,770
     
 Euronext Wheat Futures
 Net PositionNet W/W ChangeLifetime HighLifetime Low
04/11/202255,355-43,264135,400-5,305
28/10/202255,008-11,915
21/10/202266,923-22,313
14/10/202289,2366,512
07/10/202282,724347

 

 
Source: CFTC
image 55496
 
image 55497
 
image 55498
Source: CFTC
 
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