Lower for grains and oilseeds
Wheat markets traded lower with position squaring noted ahead of the report. Implied vol in Sep SRW finished at 31.5%. US export sales came in at 317kmt, below market expectations and that required to meet the USDA’s SnD. Matif wheat was down -3.5€ to 211€, this was in spite of Strategie Grain’s European report that called for the tightest collective wheat, corn and barley balance sheet in over 15 years. Prices in the Black Sea remained firm, with Sovecon dropping their Russian forecast to 68.4mmt. In demand news, the Jordan tender results had 120kmt of 12.5% protein purchased at a $235 fob equivalent for LH Oct shipment from Russia. While South Korea purchased one feed wheat cargo (not corn?) for Dec shipment at a $215 Fob Black Sea equivalent. It’s natural to have some price consolidation ahead of the report given the recent movements. BUT, the global situation in wheat is only getting tighter with drought in Eastern Australia, warm hot temps in Canada and a declining EU and Black Sea crop. Yes, there is no short fund position to exploit, but this market if getting to a point where consumers will rally the market if they try and cover at the same time. And it appears the global consumer is largely uncovered, so would expect to see a pretty active bid on any dips going forward.
Corn market was similar to beans, trading with limited conviction ahead of tonight’s figures. The Dec contract again traded through and below the 385 level as it continues to orbit around there. Tonight, we will get clarity on US yield expectations which should provide the market a more sustained direction. Export sales totalled 1.212 mmt.
Soybeans endured mild losses in a quiet, low volume, low range session ahead of tonight’s report. Export sales came in at 953kmt which is high for this time of year. Soymeal was down $3.10 per tonne and soy oil was down 3 points. Otherwise there was nothing new, we need to get this report out of the way, so we can go back to trading political uncertainty.
Canola finished lower in both contracts, following lacklustre price action from other grains and oilseeds. It’s all about the report and where to from there.
Aussie markets were stronger yesterday in quiet trade, with WA prices posting sharp gains as the demand outlook from the East continues to increase. Central NSW is the island of high prices as farmers that traditionally sell grain have turned buyers in order to feed stock. It feels like this is only the beginning of what will become a much bigger problem as the season progresses. Not only are there shortages of grain, but also hay and there is potential for grain crops to be cut for hay early if the economics stack up. We won’t see this for another 6-8 weeks, but it’s a space to watch. Both the long and short-term forecasts continue to offer nothing for the East Coast consumer and we expect to see further price support from here. WA is all we can lean on for the moment and we are not the only ones. Flour prices in Asia are increasing which will enable higher Aussie fob purchases, so it could end up in a race for remaining supplies if consumers all panic at the same time.
Source: Lachstock Consulting