Markets

Daily Market Wire 1 December 2023

Lachstock Consulting, December 1, 2023

Wheat and corn firmed. The Dow continued its rally.

  • Chicago March 2024 wheat up 12.25c/bu to US598c/bu;
  • Kansas March 2024 wheat up 8.75c/bu to 643c/bu;
  • Minneapolis March 2024 wheat up 4.25c/bu to 729.5c/bu;
  • MATIF wheat March 2024 up €0.50/t to €226.25/t;
  • Black Sea wheat futures has not quoted since 11 August;
  • Corn March 2024 up 7c/bu to 482.75c/bu;
  • Soybeans May 2024 down 3.5c/bu to 1375.25c/bu;
  • Winnipeg canola May 2024 down C$1.20/t to C$711.30/t;
  • MATIF rapeseed May 2024 down €2/t to €452.25/t;
  • ASX January 2024 wheat up A$3/t to $393/t;
  • ASX January 2024 barley unchanged at A$322.50/t;
  • AUD dollar down 13 points to  US$0.6605.

International

US wheat futures managed to string three consecutive up days in a row, closing 38usc/bu off the lows. Export sales reflect the simple theory that lower prices increase demand. The US sold 622kt wheat for the week – well over the 350kt trade guess and smashing the 250kt to hit the USDA target. The interesting part from an Australian perspective is the buyer was China. Not only did China purchase SRW but its purchases featured across all wheat classes. Hard to know when the massive short decides enough is enough or what is the catalyst to bust them out. Russian export pace has arguably been the driver for the fund short and has been a wet blanket on the global wheat market. So the fact Russia is having a tough time maintaining pace is significant. Despite the fact it announced it was back on track after weathering a number of storms at the port, every tonne not loaded needs to be found somewhere else. The French were not having such a good time however. Matif wheat reacted to ideas that the Chinese shopping spree in the US was designed to throttle French purchases. Australia needs to pay attention given the size of both the wheat and barley export program. 

In a landmark policy shift, China has directed its already battered banks to support the struggling property sector. The CSI 300 Chinese Bank Index hit a one year low and looks like it is eyeballing the October 2022 lows as the sector’s net interest margins slumped to a record low of 1.73pc, a figure under the 1.8pc margin seen as necessary to maintain reasonable profitability. 

The Buenos Aires Grain Exchange indicated the 2023-24 corn planting advanced to 32pc vs 26pc last week, while beans were 44pc planted. 

Palm oil price rallied, driven by solid shipments ex Malaysia and general global vegoil tightness.

Australia

Locally the market is trying to ascertain the implications of the recent rainfall, a question that reached the US market wires. Ideas that somewhere around 5.75-6.5 million tonnes (Mt) of wheat was standing when the worst of the rainfall fell frame the discussion.

With crop maturity in the Western Districts of Victoria and the southern areas of South Australia late enough to avoid meaningful damage, the balance of the eastern Australian wheat crop may see something like 1.5Mt to 3Mt of downgrades. Falling number machines have been turned on in the majority of receival sites and the new grade game has started. AUH4 is the first cab off the rank with specifications of 10pc screenings maximum, and minimums of 71kg/hl test weight and 150 seconds falling number. It won’t be the last one. 

The export path for this downgraded wheat is the logical next question. The Philippines has given the Asian market some pricing transparency, purchasing some pretty horrible Brazilian feed wheat with high vomitoxin due to the harvest rainfall. This feed wheat traded at circa US$260/t CNF which would peg it around A$310/t eastern Australia track which compares with current SFW1 values around A$330-335/t. It is hard to imagine that the Aussie wheat is as bad as the quality from Brazil so it will be interesting to see if the exporters get busy.

 

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