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Daily market wire 13 September 2017

by Lachstock Consulting, 13 September 2017

Overnight markets:

Mixed for grains and oilseeds as markets digest the USDA’s World Agricultural Supply and Demand Estimates released overnight.

  • CBOT wheat up 7.25c to 442c,
  • Kansas wheat up 7c to 441.75c,
  • Corn down 6c to 351.5c,
  • Soybeans down 9.5c to 950.5c,
  • Winnipeg canola down 1.30$C to 491.3$C,
  • Matif canola up 2.5€ to 363.5€,
  • Dow Jones up 61.49 to 22118.86,
  • Crude oil up 20c to US$48.27,
  • AUD down to 0.801c,
  • CAD up to 1.218c (AUDCAD 0.977),
  • EUR up to 1.196c (AUDEUR 0.670).

Wheat

Wheat found a bid after the release of the USDA report, which revised world wheat ending stocks lower by 1.55 million tonnes to 263.14Mt, 800,000t below the average market expectation. Implied volatility in the Dec Soft Red Winter wheat contract went out at 19.5 per cent. The increased Russian crop at 81Mt was also unable to shake things up, but the market has been contending with higher production figures here for a while now. Despite the production increase, Russian exports were only increased to 32.5Mt due to logistical challenges. In the US, the USDA estimate for carry-out did not change, despite a slightly lower market expectation. Production cannot yet be revised as the USDA is waiting for the Small Grains Report to come out at the end of this month. Russian and European cash prices were unchanged; if they can avoid breaking too far below current levels, the market’s attention will shift to Australia’s production, which is lower than the USDA’s forecast, as well as looking ahead to new-crop planting intentions.

Corn

Corn had nowhere to go but down, with world ending stocks increasing on the back of improved US production. The USDA came out with a yield of 169.9 bushels per acre, 0.4bu/acre higher than its August number, and below market expectations of 167.8 bu/acre. USDA increased its estimate of new-crop carry-out to 2,335 billion bushels, up from 2,273bb, and well above market ideas of 2,133. Without any significant demand surprises, corn’s balance sheet is too heavy to sustain current pricing and should grind lower to test recent lows.

Soybeans

Soybeans were hit with a heavier production figure than the market was expecting. The USDA increased yields to 49.9 bu/acre, up 0.5 bu/acre from its August figure and well above market expectations of 48.7bu/acre. This production increase was offset by an increase in exports, and global ending stocks were revised down slightly.

Canola

Canola closed slightly lower in higher-volume trade. On the plus side, crush margins in China are now supporting the use of imported seed, which will transpire into Canadian exports and prevent the nearby glut mentioned in yesterday’s report. The difference between this year and last year is that Chinese government oil reserves lack the quality required by end users. The end result should be increased canola imports. In futures trading, the mild break can be attributed to a slightly stronger dollar and mild harvest pressure.

Australia

Still nothing significant for the Aussie forecast in the next eight days, which takes us out to 21 September. Only one more dry forecast is needed to have us looking at an incredibly dry September. On top of this, we have NSW frost events and subsequent moisture losses and yield damage they have created. As temperatures start to heat up, the bias for the Aussie wheat crop with no further moisture is sub 20Mt. Cash markets are aware of this and pricing accordingly.

Source: Lachstock Consulting

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