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Daily market wire 19 May 2017

by Lachstock Consulting, 19 May 2017

Overnight markets:

Markets were led lower by a combination of macroeconomic and fundamental impacts. The big story was a breaking scandal in Brazil, where the President is the target of corruption charges. The Brazilian currency reacted accordingly plummeting with its share market, the weaker currency encouraged flat-priced grain, and oilseed liquidation from farmers. 

  • CBOT Wheat down -0.5c to 439.75c,
  • Kansas wheat down -0.5c to 443.25c,
  • Corn down -5.5c to 373.75c,
  • Soybean down -28.25c to 946.75c,
  • Winnipeg Canola down -6.40$C to 521.3$C,
  • Matif canola down -6.25€ to 359.75€,
  • Dow Jones up 56.09 to 20663.02,
  • Crude Oil up 0.009c to 49.36c,
  • AUD down to 0.741c,
  • CAD up to 1.360c, (AUDCAD 1.008),
  • EUR up to 1.110c (AUDEUR 0.667).

Wheat

Wheat managed to hang on, closing just below unchanged. Brazilian currency weakness affects wheat the least. Brazil is a net importer of wheat, so it increases their import price and may impact demand, which is a minor impact versus that felt by beans and corn. Wheat was supported as funds repositioned from corn/beans into wheat inreaction to row-crop weakness. Wet weather in the HRW area is still raising concerns for new-crop quality, though this remains a murmur which the market is not giving much airtime to presently. Weekly export sales in wheat were strong, but not out of the ordinary for this time of year.

Corn

Corn could not avoid the Brazilian currency impact, which led flat prices lower, and pressured the US market. Corn respected its tight trading range, though it’s getting dangerously close to nearby support which, if broken, could see another big slip down. Not much attention was paid to this today, but there are concerns over wet weather in the plains, which currently requires dry warm weather for crop development, and is looking at receiving a power of rain.

Soybeans

Soybeans suffered the most today as currency depreciation increased grower selling. The fall in flat price USD beans in South America has priced US beans out of export business, which was another catalyst for price pressure. New lows were formed with key support broken; this could be the catalyst for further selling when the market reopens.

Canola

Canola suffered in both old and new crop, following the weak oilseed complex. November beans broke the key $5 support level, which could indicate further weakness in the absence of fundamental issues. The fund position in canola is long, which means downside could be extended if liquidation occurs, particularly in the event of a macro risk off event which global markets appear to be preparing for at present.

Australia

The Aussie rainfall forecast has not changed since the beginning of the week, with SA AND WA missing out on this system which is adding potential to an already good start for Victorian and NSW winter crops. Rain has started falling in the Mallee and Wimmera in Victoria, with more forecast in the next eight days. Cash prices should remain quiet in wheat, though barley, which is already well supported, should have another element added today with the Saudi Government announcing a further tender for 1.5 million tonnes for LH Jly-August arrival. It’s not expected that Australia will do any of this business, but it does place balance-sheet pressure on Black Sea European crops, and may see positive price increases in the absence of grower selling in these regions.

Source: Lachstock Consulting

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