Lower for grains and oilseeds in wake of USDA World Agricultural Supply and Demand Estimates report.
- CBOT wheat down 17.75c to 546.75c,
- Kansas wheat down 18.75c to 559.75c,
- Corn down 11.5c to 357.75c,
- Soybeans down 42.25c to 861.75c,
- Winnipeg canola down C$3.8 to $504.9,
- Matif canola down €0.5 to €382.25
- Dow Jones down 196.09 to 25313.14,
- Crude oil up US$0.93 to $67.75 per barrel,
- AUD down to 0.73c,
- CAD down to 1.31c (AUDCAD 0.95),
- EUR down to 1.14c (AUDEUR 0.63).
Wheat sold off after the USDA failed to acknowledge the global production cuts that the world has endured in the past six weeks. Implied volatility in Sep Soft Red Winter (SRW) wheat finished at 29.375 per cent. It is telling that wheat prices in Europe didn’t move, in spite of the generous production estimates. Matif wheat closed fractions lower, down €0.25 to €210.75. This sell-off should be met with decent consumer interest, given that the global flat price will not fall much in response to the move. USDA left Australia’s production at 22 million tonnes (Mt), higher than last year’s figure, with an export forecast at 16Mt. This is 3.5Mt above the Australian market’s expectations. The Commitment of Traders (COT) report on wheat came in at 11,000 contracts for SRW, and 34,600 contracts for Hard Red Winter wheat, and the Minneapolis position fractions above square. Now that we are through the report, it will be interesting to see whether momentum-selling from funds will drive prices lower, or whether bargain buying from consumers will prevail. It’s hard to see significant downside from here.
Higher yields pushed corn lower, with the USDA coming in above expectations at 178.4 bushels per acre (bpa) versus 176.2bpa previously. This increased US carryout by 3.35Mt to 42.7Mt, when the market was looking for 41.4Mt. They attempted to balance this with an increase in exports, up 125 million bushels (Mbu) to 2350Mbu, but this is still seen as being too low, given the state of the global balance sheet. The COT had funds short 41,900 contracts, compared with -63,600 last week.
Increased US yields led to a significant decline in soybean prices. The USDA produced a 51.6bpa yield versus market ideas of 49.8bpa, and this added 2.85Mt to the US carryout. The global figures had beans in at 105.9Mt carryout versus market ideas of 99.3Mt. Soymeal was down $10.50 per tonne, and soy oil dropped 43 points. The COT report had the bean short at 94,500 contracts, out from -91,900 last week.
Canola followed softer price action in beans but held up considerably well, due to production concerns in Europe and a new focus on warm-to-hot temperatures in Canada that have prevented shorts from adding heavily to their existing positions.
Aussie markets were higher on Friday, with a softer currency helping to spur on both new and old-crop values. Western Australia and South Australia were well bid towards the end of last week as the market comes to the realisation that old-crop supplies are non-existent, which places a lot of pressure on new-crop to satisfy east coast consumer demand. The weather forecast is showing nothing of substance for eastern Australia, which should warrant further production concerns and price support as the week continues.
Source: Lachstock Consulting