Daily market wire 13 February 2018

Lachstock Consulting, February 13, 2018

Overnight futures markets

Much stronger for grains and oilseeds.
  • CBOT wheat up 15c to 464c,
  • Kansas wheat up 12c to 477.5c,
  • Corn up 5c to 367c,
  • Soybeans up 19c to 1012.5c,
  • Winnipeg canola up C$5.5 to $509,
  • Matif canola up €2.5 to €352.5,
  • Dow Jones up 472.62 to 24663.53,
  • Crude oil up US26.9c to $59.47 per barrel,
  • AUD up to 0.784c,
  • CAD up to 1.260c (AUDCAD 0.988),
  • EUR up to 1.228c (AUDEUR 0.638).


Short covering was the driver for wheat overnight, as an improved equities market prompted an even greater pull for funds to hit the exit button on Soft Red Winter (SRW) wheat. This was in spite of improved snow and moisture forecasts for US winter-wheat areas. Export inspections came in slightly above market expectations at 487,000 tonnes. Implied volatility in Mar SRW went out at 21.9 per cent, and the contract managed to reach a high not seen since October last year. Hard Red Winter wheat managed a close back through its 200-point moving average, another driver for fund covering in SRW. Russian values were higher at US$198 for March shipment, with its new-crop values also stronger at $192. There is a lot of smoke and mirrors in the Indian wheat market, but there is a currently rumblings of a much smaller 2018 crop, which could prompt imports in the vicinity of 5-7 million tonnes. This would be a great outcome for Australian wheat producers, given our slow start to the export game this year.


Soybeans took off on South American weather, and even the cancellation by China of four US cargoes in exchange for cheaper Brazilian supplies was not enough to settle the market. Rain forecast for Argentina over the weekend did not eventuate, and this, combined with dry weather through to next Friday, supported values early on. Northern production regions of Brazil are expected to get pelted with 60-110mm of rain due to tropical storms which have popped up. Soymeal led the charge, finishing $14 per tonne higher, while oil finished down 11 points. New buying was noted from money exiting a stronger equities market.


Corn was a passenger overnight, following strength in beans and wheat, but not to the same extent. Commitment of Traders Report data for corn revealed a significant reduction in the short position, which was managed over a 12-cent trading range. This served as a reminder to the market of adequate available corn for sale above the current market. Corn remains a dark horse due to the uncertainty surrounding Brazil’s second crop, with the USDA’s forecast well above that of Brazil’s Conab. US weather has numerous heavy rain bands forecast for the delta and southern corn belt this week, which will alleviate some concerns there. Export sales were 24pc lower than last week’s at 835,000t.


Canola followed beans higher in a convincing show of technical strength. The May contract broke through its 50-day moving average, and now looks poised to make a run at the 100 and 200 dma at C$511 and $512. The CAD was relatively flat and had no major influence as the market adjusted pricing ideas for new-crop production volatility in beans, which benefited canola.


The Aussie market was quiet in typical Monday fashion yesterday, with Friday’s close weighing on sentiment before the day futures session opened much stronger. Northern markets for sorghum, wheat and barley all remain well bid, with drawing arcs widening for southern winter crops. A slightly higher currency could see some revised bids in barley today, but the offer side of the market is so scarce that it shouldn’t have too big an impact. Dalian corn futures remains strong, sitting at US$287 equivalent in the May contract. With a developing India story and a rising futures market, today could be a good one for wheat, and the market might return the full move which has not occurred often in recent times.


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