Daily Market Wire 1 July 2020

Lachstock Consulting, July 1, 2020

Corn rallied hard, Minneapolis rebalanced as all markets firmed:

  • Chicago wheat September contract up US5.25 cent per bushel to 491.75c;
  • Kansas wheat September contract up 3.25c to 439.75c;
  • Minneapolis wheat September contract up 10.5c to 520.25c;
  • Corn September contract up 12.75c to 341.5c;
  • Soybeans September contract up 18.75c to 877c;
  • Winnipeg canola November contract up C$2.40 per tonne to $476;
  • MATIF wheat September contract up €1.25/t to €180.50;
  • MATIF rapeseed August contract up €2.50/t to €378;
  • Brent crude August contract down US$0.56 per barrel to $41.15;
  • Dow Jones index up 217 points to 25813;
  • AUD firmer at $0.6907;
  • CAD firmer at $1.3569;
  • EUR weaker at $1.1232.

USDA heavy corn area cut

The USDA shocked the market with bigger acreage cuts than the market was expecting. It seems a flat report would have been equally shocking given the uncertainty we have experienced this year but, to cut 5 million acres (Ma) from the March intentions is a significant move. Remembering that at the time the survey was carried out for this report there was still corn to plant, so the actual number could be even lower. Leading into the number, the corn balance sheet was extremely heavy. If all else is equal the USDA has removed around 1 billion bushels (Bbu) from this balance sheet. Amazingly it is still comfortable but certainly tighter. Acre cuts are clear, subsequent reactions are not. China domestic corn values rallied hard on the cuts but then spent the rest of the session easing lower. How would a higher corn market influence the Phase One deal?

Watch for the cracks in wheat

Wheat was less interesting but still had a few twists and turns. The USDA pegged spring wheat acres at 12.2Ma vs the average trade guess of 12.55Ma. This becomes significant when considering the current crop condition rating which has fallen from 81pc good-to-excellent 2 weeks ago to 69pc this week. There is no doubt wheat loves a spot fire and, in the case of the Chicago contract, has been an efficient vehicle to inflict the most pain it can. So while the all wheat balance sheet remains more than comfortable any cracks need to be watched carefully.

Stocks neutral beans, bearish wheat and corn

The other part of this report was the stocks-in-all-positions estimates. This marks as the year-end carryout for wheat and late season for the row crops so it will have an impact on the following crop year’s ending stocks figures. These estimates were bearish for corn and wheat and neutral for beans. Wheat stocks were pegged at 1.044Bbu vs the average trade guess of 0.980Bbu.  Corn was a more burdensome 5.224Bbu vs the trade’s ideas of 4.951Bbu. The corn number would certainly be influenced by lower ethanol production and potentially lower feeding. Whatever the case this does tip some tonnage back into the bucket.

US can be a price island

What does all this mean? Corn is still heavy and wheat is searching for a story without meaningful satisfaction. But market structure is important in the context of an estimate shock and the market was/is short. This has the potential to move the market more than it deserves but this then means the US pricing structure can become an island and it trades independent of global pricing relativities.


Aussie markets seem to have found some common ground this week, as new season prices bleed lower than last week. Yesterday we saw values around the country hold or even move a fraction firmer, especially for wheat. New season wheat ticked a couple of bucks higher and so did canola. For the most part, growing conditions continue to be ideal for crops while we start to see some concerns of dryness in Qld, northern Eyre Peninsula and into the northern parts of Western Australia. Forecast models are indicating very little rain for those areas in the next 14 days. Showers are expected to hit parts of South Australia later this afternoon and continue through to the back end of the week pushing into south west areas of Victoria and southern WA continues to remain positive with a 5-10mm event on the BOM 8-day forecast.

Source: Lachstock Consulting

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