Overnight futures markets
- CBOT wheat down -4.75c to 487.25c,
- Kansas wheat down -5c to 516.75c,
- Corn down -2c to 395.75c,
- soybeans down -2.25c to 1047.75c,
- Winnipeg canola down -3.70$C to 523.4$C, and
- Matif canola down -1.75€ to 347.25€.
- The Dow Jones down -218.54 to 24189.45,
- Crude Oil up 1.3c to $US66.81 per barrel,
- AUD down to 0.775c,
- CAD down to 1.257c, (AUDCAD 0.975) and the
- EUR up to 1.236c (AUDEUR 0.627).
Wheat settled lower with a wetter Hard Red Winter (HRW) wheat areas forecast the major driver. The 4-day saw scatter showers with ok coverage, while the forecast 1-week out looked fairly wet in HRW areas, though a week is a long time in weather. In any case the moisture deficits will still be present and this will not provide substantial relief.
Today’s price action suggested tired buyers, so we’ll need to wait for a new catalyst like state conditions on Monday to keep things ticking. Sellers tried to push the market to the gap formed on Monday, but this was not achieved. Implied volatility in May Soft Red Winter (SRW) wheat futures went out at 32.27 per cent (pc).
Russian prices were US$211-215/t free on board (fob) old crop and $199-202/t fob new crop; this inverse is widening. The Ruble was down another 3pc in early trade, before prompting a strong turnaround to finish with slight gains. Despite the Ruble weakness, we are not yet seeing huge FOB discounts. It is difficult though for the international trade to get excited about selling the cheapest wheat in the world (Russian origin) pre-harvest, because any further rise in price could expose those holding long positions to execution risk of potential counterparty default.
Soybeans settled lower in a mild ranging session. The market pushed towards yesterday’s highs, before a lack of buyers saw things settle lower. The market proved that a Chinese tariff on beans would merely reshuffle trade flows. Argentina bought 120,000t of US beans, while Mexico bought 140,000t in a flash sale. Soymeal was down $3.70/t and soyoil was down 32 points.
Canola finished lower again, with a stronger dollar continuing to add pressure. The inverse is slowly easing off as nearby futures contracts near expiry and the trader requirements ease. It’s possible that grower selling could overshoot things here, given that they have been holding the market up on inactivity.
Corn ran into some new crop farmer selling, which saw it settle lower in the presence of very little fundamental news.
Ethanol production came in at 1.034 million barrels per day for the week, which slightly below last week’s figures. Ethanol stocks are at their lowest level since November last year at 21.846 million barrels. This could possibly be due to reduced production on the back of the Chinese tariff issue.
The market has done enough work to the upside for now, but spring weather remains a threat and old crop stocks will not provide any insulation.
In Australia, old crop markets in wheat and barley were stronger despite the lower futures market and higher dollar. Grower liquidity remains dead, while they prepare to sow into dry profiles. The 8-day forecast is less promising that originally thought, which the cash market seemed to come to agreement on yesterday.