Markets

Daily market wire 10 July 2017

Lachstock Consulting, July 10, 2017

Friday’s markets:

Mixed for grains and oilseeds to round out a tumultuous week.

  • CBOT wheat down -4c to 535c,
  • Kansas wheat down -3.5c to 543c,
  • Corn up 2c to 392.5c,
  • Soybeans up 15.25c to 1001c,
  • Winnipeg canola down -1.10$C to 517.3$C,
  • Matif canola up 2€ to 369.25€,
  • Dow Jones up 94.29 to 21414.34,
  • Crude Oil down -1.19c to 44.33c,
  • AUD down to 0.759c,
  • CAD up to 1.288c, (AUDCAD 0.978),
  • EUR up to 1.139c (AUDEUR 0.666).

Wheat

Wheat was softer in all classes. There was no improvement in the weather threats for the northern plains and the prairies, but the market took a pause to assess how much we have rallied and how much we should to ration demand. Spring wheat ran out of steam, but that story is not finished. Trading ranges were still fairly high as the market awaits direction. Grower selling in winter wheat was noted, which weighed on the market. Despite the weaker close, Soft Red Winter (SRW) wheat managed to defend key technical support. The Commitment of Traders (COT) report revealed the SRW wheat position had moved from -63,500 to -38,500 contracts week on week, so with fund longs in Spring wheat (9,200) and Hard Red Winter (57,900), we have a net long position in wheat. Given last week’s rally, no structural story, a well-stocked old-crop balance sheet, and potential harvest pressure from Europe, wheat will need a huge catalyst to create new highs.

Corn

Corn finished higher, finally showing some independence from wheat. Corn weather will be a key market driver this week, and on Friday it was thought to be in reasonable conditions, with most of the hot, dry weather too far west. Export sales were disappointing at 140,300 versus market ideas of 450,000. This is a very clear indicator of the heavy corn balance sheet, and the ease in which it can lose business to better-priced origins. Corn COT came in at-83,300 versus 150,500 last week. This reflects a significant weekly coverage and confirms suspicions that farmers were heavy sellers on the way up. To cover that sized position in around 25 cents is impressive, and suggests we need a much bigger problem than our current one to rally things from here.

Soybeans

Soybeans took the lead as the fund short began to take notice of the soybean acreage in the Dakotas and the impact the weather driving spring wheat will have on yields. China has been buying South American beans, which is positive, considering they have been inactive of late. The COT report released after close revealed the fund position has decreased significantly week on week, moving from -146,700 to -104,200, though this position is still historically high for soybeans.

Canola

Canola’s hot streak ended with a mildly softer close. Weather concerns are still present across the prairies, but a stronger dollar was enough to keep things on the defensive. Canola has had a brilliant run of late, and Friday’s close defended key technical levels, so it’s hard to see this story ending here. The Chinese crop is forecast down year on year, the Aussie crop is in trouble, so it will be interesting to see what happens to European yields when harvesters start rolling there.

Australia

Aussie weather has nothing on the forecast for Western Australia and South Australia, but Victoria  is looking at getting another top-up rain. Last week’s rainfall in SA and Victoria did not look significant at the time, but looking back to weekly totals, it appears that some heavily stressed parts of SA and WA received 15-25 millimetres; it won’t fix the problem, but it will buy some time. Cash markets are relatively quiet, with wheat basis getting slammed on the move up. Last week saw some great opportunities for new-crop sales/hedges, though the uptake was not as large as expected, with a lot of growers not comfortable hedging any production.

Source: Lachstock Consulting

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