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Daily market wire 18 May 2017

by Lachstock Consulting, 18 May 2017

 Overnight markets:

Higher for grains, mixed for oilseeds.

  • CBOT Wheat up 2c to 440.25c,
  • Kansas wheat up 2c to 443.75c,
  • Corn up 3.5c to 379.25c,
  • Soybean down -1.25c to 975c,
  • Winnipeg Canola down -0.20$C to 505.9$C,
  • Matif canola up 1€ to 366€,
  • Dow Jones down -372.82 to 20606.93,
  • Crude Oil up 0.30c to 48.96c,
  • AUD up to 0.743c,
  • CAD down to 1.359c (AUDCAD 1.010),
  • EUR up to 1.116c (AUDEUR 0.665).

Wheat

Wheat rallied on a weaker US dollar and Egypt’s General Authority For Supply Commodities (GASC) awarding HRW export business in their latest tender. More rainfall is forecast for HRW areas, which will add to disease potential. The recent sell-off should position HRW to compete into North Africa’s hard wheat demand. Old-crop stocks are not tight in the US, but if we continue to price this demand, with new-crop looking a little shaky, this could become a story. In SRW, open interest continues to rise, suggesting more sell-side pressure from funds. Hard to get excited about a short-covering rally at present, given how easy it has been to unwind large shorts recently.

Corn

Corn traded higher, with nothing exciting noted from a fundamental perspective. The weekly ethanol production figure was strong, though the strength in corn was most likely on the back of US dollar weakness. The global picture remains heavy, and US farmers are still sitting on a sizeable old-crop position, which should have to move before new-crop harvest comes around. With stocks heavy and consumption hand to mouth, it is hard to envisage a huge break in futures. It is looking as though we will respect the tight recent chart ranges, with bias to the downside.

Soybeans

Soybeans traded slightly lower in an uneventful session. US dollar weakness and increased Chinese meal demand supported things early before a weakening Brazilian Real encouraged farmer selling that pressured futures. There are still some minor concerns regarding wet paddocks and seeding access in western parts of the US soybean belt, though the market is not giving this a heap of attention. Demand in China is expected to slow in June when a large amount of soybean shipments arrive. In addition, there is some market speculation that crush demand will slow in China which, if realised, will pressure futures, given the weight of volume in South American and the US.

Canola

Canola was basically unchanged in a session lacking any fresh news. Tight old-crop supplies are not discouraging nearby demand, which should see stocks deplete further and inverses widen. The jury is still out on new-crop, with mixed views on seeding amounts and yield outcomes leaving a wide range of potential market scenarios.

Australia

The weather forecast in Australia is unchanged: very promising in Victoria and NSW, but limited in SA and WA, where it is most needed. Cash markets have been fairly quiet for wheat on the futures break, while barley continues to run on the back of ongoing export demand and a tightening old-crop S&D; it feels like only a matter of time before it inverts over new crop.

Source: Lachstock Consulting

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