Big gains for grains as El Nino distorts weather patterns
Today’s commentary is once again being brought to us by the letter G but this time, its all about grains.
Grain prices in the US have taken off this week and today Corn, Wheat and Soybeans are all breaking out of bases. The reason for the sudden surge in interest is a growing concern that unusual weather could impact crop yields and quality in both North America and Europe.
This year’s El Nino has wreaking havoc on weather conditions in key growing regions with the US grain belt getting way to much rain while grain belts in Canada and Eastern Europe have been getting way too little rain. The impact of El Nino on crops has the potential to become a big story as we move deeper into summer and closer to harvest.
So far cotton hasn’t moved but if general crop conditions worsen the potential for a catchup rally could increase.
On to the other big G word of the week, Grexit. Europe has spent the day stuck in a holding pattern with traders unwilling to commit either way ahead of this weekend’s big meetings which really have a make or break feel to them. German finance minister called it 50-50 and trading today indicates the street appears to be in agreement that it really could go either way.
This means that next week could potentially kick off with huge moves, but nobody knows which direction yet.
US markets are also trading pretty much flat so far. As the day progresses we could see some capital move to the sidelines ahead of the weekend. So far CHF has been strong but that appears to be it for defensive flows with GBP, USD, JPY and gold all steady.
Oil is down slightly with CAD and NOK pretty much even. There could be some interest in oil related trading this afternoon around the weekly drill rig count.
AUD and NZD have been under pressure overnight despite a positive New Zealand trade balance. This suggests that China-sensitive currencies may be responding to the big selloff in China stocks as they fall back to Earth unwinding the massive rallies they staged a few months back.
There have been no major corporate announcements so far this morning.
Significant announcements released overnight include:
Sweden trade balance SEK 2.3B vs previous SEK 5.7B
Sweden retail sales 3.9% vs street 4.2%
NZ trade balance $350M vs street ($100M)
Japan unemployment rate 3.3% as expected
Japan consumer prices 0.5% vs street 0.4%
Singapore industrial production (2.3%) vs street (2.6%)
Upcoming significant announcements include:
10:00 am EDT US UMichigan sentiment street 94.6
10:00 am EDT US UMichigan 1 yr inflation est previous 2.7%
1:00 pm EDT US Baker Hughes drill rig count previous 857