Just a few short years ago the buzz word throughout the global financial world that was turning markets and currencies topsy-turvy was “Grexit”, the thought that Greece would be forced to exit the European Union. As we know, that did not occur but there was much angst and money exchanging hands as the debate raged as to if it would happen. Today, that word is “Breixt” and literally today the citizens of Great Britain will cast their votes in a referendum as to if the nation will make an exit from the European Union. Mind you, this is not the first time this has occurred as in 1975, just two years after Great Britain had joined the EU, they held a referendum as to if they would leave, which was defeated by a margin of over 67% and even if the vote came out in favor of an exit, it would be a gradual process over the next two years. Regardless it has created quite a bit of turmoil in currency and equity markets. A week ago when many still believed a “Brexit” likely, the British Pound and European equity markets were under pressure with a flight to the assumed safety of the U.S. Dollar and Gold and this week with the polls suggesting the amendment will be defeat
ed, just the opposite has occurred. In case you are curious, the most recent polling suggests that those against leaving the EU stand at 73% of voters, nearly the same percentage that an exit was defeated by 40 years ago. Now that it would appear a change has been averted, my question is who will be the next to become concerned with. There are 28 nations currently in the Union so will the next panic be coined the Swed-exit or maybe Slovak-exit or possibly the most frightening of all…a possible Cypr-exit. That could send the world markets into a real tizzy!
Unfortunately, the breakdown in the US Dollar this week has done little to support the prices in grain and soy markets but as I commented yesterday, this time of year weather will trump all else. That said, even this swoon will likely not stem the flow of investment money that has been moving back into commodities. The Deutsche Bank’s PowerShares DB Agriculture ETF reports an inflow of $162 million thus far in 2016, making this the first year for inflow since 2009. This particular ETF invests in 11 ag commodity futures and currently holds 28% of the open interest in July 2017 hard red wheat.
Export sales would not appear to be able to provide much in the way of support this morning either. While still not bad, corn sales were down 4% for the week and 32% from the 4-week average at 870,700 MT or 34.28 million bushels. Top numbers were sold to Japan with 232.4k MT, Mexico with 162.4k and Venezuela with 86.4k. Total bean sales came in at 660,700 MT or 24.28 million bushels. This was 19% below the last week but still 13% higher than the 4-week average. The top spot was again unknown destination with 444.9k MT followed by Japan with 81.5k and Thailand with 41.5k. Wheat sales were 40% below last week coming through at 462,700 MT or 16.98 million bushels. Top purchasers were the Philippines with 124.4k MT, Venezuela taking 90k and Indonesia with 71.5k.
We have the corn and wheat markets once again approaching support and in the case the latter, the range that has been the base for the past six months or better. I would like to believe we should see these market stabilize now through the 4th of July. Beans? They continue to dwell in a different space but are currently teetering close to the edge of the cliff and it may not take much of a breeze to send them over and into a correction over the next few weeks.