Australian rallied and offshore markets overnight gave back much of the previous day gains.
- Chicago wheat December contract down US37 cents per bushel to 901c/bu;
- Kansas wheat December contract down 33.5c at 990.75c/bu;
- Minneapolis wheat December contract down 29c/bu to 985.25c/bu;
- MATIF wheat December contract down €8.25/t to €356/t;
- Black Sea wheat December contract down $5/t to $335/t;
- Corn December contract down 5.25c/bu to 693/bu;
- Soybeans November contract up 2.25c/bu to 1376.25c/bu;
- Winnipeg canola Nov 2022 contract was down C$9.40 to $859.20/t;
- MATIF rapeseed November 2022 contract down €12.25/t to €630.25/t;
- ASX Jan 2023 wheat contract up A$18/t to $480/t;
- ASX Jan 2023 barley contract up A$6.50/t to $339/t;
- AUD dollar weaker at US$0.627.
24 hours is a long time in this market. From the dark prospects yesterday to glimmers of hope both around the export corridor and potential talks between Russia and the US. Russian Foreign Minister, Sergei Lavrov indicated he was open to talks with the West but was yet to receive any serious proposal. Meanwhile, the White House national security spokesman John Kirby said they were willing to talk but Russia said no. I hope they televise a meeting between Vlad and Joe! The UN chief Martin Griffiths was upbeat about the corridor staying open and added in Russian fertiliser, throwing Russia a bone which seemed a little odd.
If we were assessing the global market simply by looking at Dec-22 Chicago wheat you could be excused for wondering what all the fuss is about. Back in Feb, the USDA had global wheat ending stocks at 280Mt for the 2021/22 season and Chicago wheat was trading around US$8/bu. Yesterday Dec-22 went home at $9/bu and the USDA Sep new crop (22/23) estimate had shrunk to 268.57Mt. So, global ending stocks were over 4pc tighter, and we have added $1/bu to flat price. The function of the market is to find the appropriate amount of risk premium to cover the “what if.” It begs the question, is Chicago the best barometer for risk premium? Part of the pressure last night was the fact Russia sold a bunch of grain to Algeria at pretty attractive levels.
The Argentine wheat crop was pulled back another 500,000t yesterday with Rosario pegging production at 16Mt (USDA 19Mt).
The USDA will release its Oct estimates which will add another spin on the fundamentals. They have the Ukraine in for 20.5Mt of wheat production along with 11Mt of exports. Most seem happy that the Russian crop is closer to 100Mt vs the USDA at 91Mt but, with Russian exports pegged at 45Mt it will be hard for any increase in production to find its way into the global market.
The AUD made fresh lows for the move overnight to touch 0.6247. Consistently lower growth targets for China along with a more aggressive US monetary policy has kept the AUD offered. China’s Purchasing Managers Index (PMI) came in at 49.3 vs estimates of 54.5 which further supports the recent IMF growth downgrade for China, indicating that GDP growth would fall to 3pc, down from 8pc last year.
Local markets were stronger yesterday as offshore rallies coincided with a weaker AUD. Although in eastern states we saw both wheat & canola push to short term highs there was limited selling liquidity from the grower as the next rainfall event arrived and threatened some production security.
Feed grain spreads weakened off the back of the forecast whilst milling grades continued to firm. ASX eastern wheat January contract was up 3pc, touching A$480/t before relaxing slightly.
The stand-off continues as neither sellers nor buyers want to take on significant quality risk until closer to harvest.
WA canola showed some strength yesterday with most ports trading to $840/t for non-GM.
The rain keeps coming with our model indicating a slab of Victoria is set to get close to 10mm for the next 15 days, the majority scheduled to fall in the next 2 days. On the Queensland border region the rain is likely to be lower than previously forecast but indications are for more storm rain there than the south.