Daily market wire 1 Dec 2016

Lachstock Consulting, December 1, 2016

lackstock1Negative for grains on month end selling, positive for Canola on OPEC agreement.

CBOT Wheat down -6c to 402.75c, Kansas wheat down -8c to 410.25c, Corn down -0.5c to 348.5c, soybeans down -10.25c to 1032.25c, Winnipeg canola up 5.6$C to 525.2$C, and Matif canola up 3.5€ to 408€. The Dow Jones up 1.98 to 19123.58 , Crude Oil up 3.77c to 49c, AUD down to 0.738c, CAD up to 1.343c, (AUDCAD 0.991) and the was EUR down to 1.059c (AUDEUR 0.6969).

Crude oil was up almost 8% as OPEC reached agreement on a deal, exceeding market expectations. They cut production by 1.2 million barrels per day, this is the first agreement to cut production for the first time in 8 years.

Canola futures followed crude, palm and bean oil higher.

Soybeans rallied with crude, but sold off as longs took profit before month end. A stronger US dollar didn’t help, putting pressure on exports. Add improved weather conditions in South America and the focus quickly returns to adequate world stocks.

Corn’s link to oil price strength was reflected early, before it broke to close slightly lower. Ethanol futures rallied sharply, which implies greater corn usage. But the problem remains that stocks are too heavy and ethanol usage ahead of USDA’s forecast is not enough to create a supply issue.

To change sentiment market needs a production disaster in new crop, plus serious nearby export demand to help reduce carryout. Seems like too big a challenge at present. Adequate feed grain supplies creating strong competition. Add continuing bird flu outbreaks and the demand picture gets uglier.

Kansas joined SRW forging new lows, both contracts under pressure today from the spec community, weighing heavily with month end selling.

Fundamentally, talk of larger Argentinian and Aussie crops is not providing any price strength in the near term either, with FOB price declines suggesting stiff export competition going forward.

Fundamental and technical sentiment suggests ongoing pressure in the wheat market until we can unveil significant demand, or find a supply problem in new crop. Sovecon forecast Russian grain production down 7 mmt for 2017.
Source: Lachstock Consulting 


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