Higher for grains and oilseeds.
Wheat had a reality check with limited sellers ahead of this week’s USDA report, and with production cuts in Australia and more potential for government export controls in Russia weighing in. Implied volatility in Dec SRW finished at 25.75 per cent. ABARES has reduced its forecast for the Aussie wheat crop to 19.1 million tonnes (Mt). This was on the high side of local estimates, but a considerable move from their last update at 21.9Mt. The USDA, now on 22Mt, should follow suit here. This means the world needs to find 2.9Mt more of global supply, which can only increase US exports, or lose that in demand. This seems unlikely, given the tightness of the global situation already. Matif wheat futures finished up €4.25 per tonne at €202/t, with comments from the Russian Department of Agriculture increasing speculation on export intervention. With a total grain crop of 105Mt, Russia’s agriculture minister suggested that 30Mt of exports would be the maximum they would allow, 25Mt of which would be wheat.
Barley had some excitement with Saudi purchasing 1.5Mt at an average price of $260/t, which gets close to pricing Canadian and Aussie stocks. China has been quiet with regards to feed purchases, but if its appetite changes, then we could be in for further strength. ABARES has pegged the Aussie crop at 8.3Mt, slightly above local expectations.
Corn couldn’t follow wheat higher, despite the market estimating yield revisions in this week’s USDA report. Beans held corn down, with the Trump Government announcing potential for a new set of tariffs on all imports from China.
Beans finished fractions higher, with uncertainty surrounding recent rainfall in the US Midwest, and whether it helped or hindered the crop. Frost in China’s northeast has raised some eyebrows, with thoughts that potential damage could encourage greater import demand, but where this could come from is uncertain, as Brazil is running low on stock, and no resolution in sight on the trade front. New tariff potential showed further declines in the China-US relationship, and did nothing constructive for the bean market. Soymeal was up $1.70/t and soy oil was up 9 points.
Canola was stronger in both contracts, led by Matif, and thanks to limited grower engagement in Europe and ongoing production concerns. The Winnipeg fund position is relatively short at around -20,000 contracts, making for a reasonably responsive fund community.
The Aussie forecast has no significant moisture forecast for the next eight days, but it does have hot temperatures and high winds in parts of Victoria and New South Wales, which are likely to cause further yield declines if they eventuate. Western Australia is the only pillar supporting the Aussie market at this stage, and the local and global reliance on production there is only increasing.