Overnight markets:
Lower for grains and oilseeds.
- CBOT wheat down 2c to 433.25c,
- Kansas wheat down 3c to 428.25c,
- Corn down 3.25c to 346c,
- Soybeans down 0.25c to 976c,
- Winnipeg canola down C$0.60 to $499.5,
- Matif canola up €1 to €365.
- Dow Jones up 42.20 to 22872.89,
- Crude 0il up 10c to US$51.02,
- AUD up to 0.778c,
- CAD down to 1.245c (AUDCAD 0.970),
- EUR up to 1.186c (AUDEUR 0.656).
Wheat
Winter wheats were defensive early, pushing the key 430 technical level in Soft Red Winter (SRW) before rallying to finish 4 cents of their lows. Implied volatility in Dec SRW went out at 17.5pc. The fund community looks to be making a push for new lows in wheat, but US wheat is closer to export pricing than it has been in previous years, which could set up a nice bear trap. A surprise daily sale of 104,200 tonnes of Hard Red Winter wheat to Mexico has been announced. Talk of increases to the Indian import duty is putting pressure on EU prices, and perceived reduction in Black Sea exports is likely to place pressure on other destinations. Russian wheat prices felt some of this pressure, falling slightly despite a stronger ruble. Demand-wise, we have a lot of wheat tenders coming up with Iraq, Morocco, Saudi, Tunisia and Algeria all due within the next week.
Corn
Corn pushed new lows in another low-range session, as speculation mounts for Thursday’s USDA report. Daily sales featured 150,000t into Mexico. The market is expecting to see 560,000t in world ending stocks in tomorrow’s report. With corn being this close to contract lows, we need to think about what’s changed since we were last here. We did not have the South American new-crop concerns which we are currently facing, so with the short position increasing as it has been recently, it is hard to see a heap of downside from here.
Soybeans
Soybeans closed unchanged in a low-range session as the market awaits direction from the USDA. Soymeal prices were down $1.30/t, while oil rallied 5 points. Exports featured the announcement of 650,000t of flash sales, including 264,000t to China. Dryness in northern Brazil is forcing producers to switch into lower-yielding, short-season varieties. The market is expecting a reduction in global ending stocks of 1 million tonnes since the September report.
Canola
Canola was mixed, with volume slightly lower on yesterday’s session. The Canadian crop is increasing in size and the Chinese export demand is not stepping in as expected, with talk of limited oil storage capacity due to recent increases in bean imports. Chinese demand has potential to make or break canola pricing, given what its demand will mean to global supply-and-demand figures.
Australia
Aussie weather featured 10 to 15 millimetres in parts of Western and South Australia, Victoria and central NSW. This will prevent further winter crop declines in eastern states, and assist upside potential in SA and WA. The forecast is still impressive for Queensland, with 25-50mm expected in the majority of sorghum-growing regions. Cash markets have been soft on the forecast, with old-crop supplies on the east coast putting pressure on basis, forcing a drop in relative values to SA and WA.
Source: Lachstock Consulting
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