Lower for grains and oilseeds.
Wheat had nowhere to go after rallying yesterday on a short-term squeeze in the December contract. Weaker crude oil prices contributed to a softer ruble, which prompted lower wheat prices. Implied volatility in Dec Soft Red Winter wheat finished at 20 per cent. Matif wheat was down €0.25 per tonne to €201.75/t, Black Sea wheat was down $1.25/t to $235.75/t, and the ruble was down 0.25pc to $0.0146. US weekly export inspections were on the low side of expectations at 342,000t. US winter wheat plantings have come in at 89pc completed, up 5pc on last week, and while it is early days, there are some concerns mounting for Hard Red Winter wheat where record cold temperatures could prompt early dormancy, leading to yield declines. Conditions came in at 54pc good to excellent. Iraq is making enquiries about importing Russian wheat, which would remove any premiums out of US or Australian Hard wheat in the short term. For this to eventuate, a fair bit of government box-ticking would be required, so it is just a space to watch for now.
Corn suffered selling pressure to forge new weekly lows. The ethanol market suffered, in line with crude oil weakness, reducing margins and the demand profile for corn. Growers are favouring the strategy of selling corn and warehousing beans, which is capping any strength that presents to this market. US harvest progress came in at 84pc, up 8pc on last week, and US export inspections were 1.136 million tonnes (Mt).
Soybeans finished with mild losses and could have rallied on positive US-China dialogue, had it not been for extensive macro weakness. Crude oil dropped 7.7pc, which ruined any trade-based optimism. Soybean meal was down $1.70/t, and soy oil was down 0.16 points. Soybean harvest increased 5pc from last week, and is now 88pc completed. US weekly inspections came in at 1.3Mt, above market expectations.
Canola got caught up in the crude sell, following it lower. Canola area in the Black Sea has expanded, despite cold temperatures and dry conditions, which are causing some planting delays. This contrasts with German area, which has been forecast to drop 18pc by the German oilseed industry.
Barley prices have suffered heavy selling pressure in Australia over the past two weeks, with harvest pressure pushing Western Australian prices to levels that entice Saudi demand. China added some political pressure to the market, with rumours circulating that an anti-dumping investigation into Australian barley is currently under way. As is the case with China trade, nothing is ever clear, and while some consider this will not be an issue for Australian barley demand this year, anything is possible. To some extent, it is hard to see China not importing Australian barley, given their heavy reliance on at least 1.5-2Mt of Australian malt. If Aussie barley is banned, their import-reliant malt industry will have a lot of trouble sourcing alternative supplies. When we consider the varietal constraints that determine planted area based on malt industry requirements, alternative suppliers would have a hell of a time getting other origins to plant malt varieties in such a short space of time, and China’s local industry would suffer immensely.
Cash markets stabilised in WA yesterday, with barley now finding a support level near Saudi replacement values. Wheat basis softened yesterday, with noone willing to return the full futures movement, given the potential harvest pressure and current detachment between US futures and cash wheat prices. Weather-wise, the forecast is showing 10-15 millimetres of rain for south-central New South Wales and eastern Victoria.
Source: Lachstock Consulting