Daily Market Wire 11 July 2018
Lower for grains and mixed for oilseeds.
- CBOT wheat down 16c to 492c,
- Kansas wheat down 11.25c to 494.75c,
- Corn down 6.25c to 347.75c,
- Soybeans unchanged at 855.75c,
- Winnipeg canola down C$3.80 to $502.50,
- Matif canola up €0.25 to €358.5,
- Dow Jones up 143.07 to 24919.66,
- Crude oil up US$0.19 to $74.04 per barrel,
- AUD up to 0.746c,
- CAD up to 1.311c (AUDCAD 0.979),
- EUR down to 1.174c (AUDEUR 0.635).
Wheat values got slammed overnight on news of improved European weather in a session that saw the gap from 3 July filled. Implied volatility in September Soft Red Wheat futures finished at 28 per cent. After seeing reduced French production last week from Strategy Grains, the French Farm Office updated its production figure, which is now 2.9 million tonnes (Mt) above the Strategy Grains number. Combined with a better weather forecast for eastern Europe and Ukraine, this pushed down values. Matif futures dropped €3 per tonne, while Black Sea fob values fell US$4/t for the week. The Egyptian Government’s GASC tender results revealed purchases of 175,000t at $203-$205/t c and f, and futures weakness is taking US wheat closer to export parity if basis maintains current levels. However, it is s unlikely to occur this early in the season, given that warehouse operators want to fill their sites and capture storage premiums. This could influence US carryout in USDA’s World Agricultural Supply and Demand Estimates report due out Thursday, which is expected to show significant global declines that will require US demand on paper.
Corn sold off, with a cool and wet forecast for most of the US corn belt limiting any potential pollination issues, and increasing the market’s confidence in above-average yield prospects. Brazil’s CONAB lowered the country’s corn-crop estimate to 82.9Mt, 2.1Mt below the USDA’s current estimate. If not for tariffs, US demand will be at record levels this year, given the tightness in the global balance sheet.
Soybeans finished unchanged after trading higher and lower within an 18-cent range. It’s Groundhog Day, with the market trying to solve the US balance sheet without Chinese demand. This is possible, but it will be fairly messy. The trade war continues, with China increasing its taxing of US products. CONAB increased the size of Brazil’s crop to 118.9Mt, 900,000t above the USDA estimate. Soymeal was up $2.30/t, while soy oil was up 13 points.
In canola, Canadian futures followed weakness in vegoils, while European futures finished fractions higher with production uncertainty there discouraging any selling.
Aussie markets were stronger yesterday, as production ideas are continually revised lower. Production forecasts are the most variable in New South Wales, where the wheat crop is estimated at 3-5Mt. Rainfall for the year is close to record lows across most of the state, so spring rainfall will have a lot of making up to do to pull things higher. South Australian production has not had a lot of coverage, but its crops are under stress, with the next two weeks being crucial for a turnaround. The eight-day forecast is not showing anything promising for NSW or South Australia, so we expect to see increased price support while it stays dry.
Source: Lachstock Consulting