All the reasons for Tuesday’s rally could conceivably be used to explain why the market broke in Wednesday trading. Technically, there was a failure to break above the 100-day moving average, and a lack of follow-through. On weather, exceptionally cold conditions in the mid-west have come early, and funds remain overly short. The USDA has pegged winter-wheat conditions down 3 per cent, which brings them into line with last year. However, there is close to no correlation with crop conditions prior to dormancy and final yields. Media reports that the China-US trade deal has hit a snag suggest that specific amounts of US agricultural products China is slated to buy are far from determined.

The US corn crop was rated at 66pc harvested, behind the five-year average of 87pc for this time of year, while beans were 85pc versus the five-year average of 92pc. Once again, the speculation around the impact of such a late crop has the market divided. The USDA threw the market a bone in the November report by cutting yield, but fell short of hitting a test weight panic button. Such is the nature of uncharted waters – anecdotal reports, rather than quantifiable data, tend to dominate the narrative.  However, the rhetoric around the impacts of lower test weight cannot be ignored, as 1 or 2 pounds on test weight would meaningfully change the national carryout. This will potentially take months to feed through, and it would be safe to assume that the USDA will tread cautiously as the season progresses.

Australian wheat and barley markets have continued to ratchet higher.  Yesterday, the ASX January wheat contract rose $1 per tonne to settle at $343/t, and bid-side interest pushed a fraction higher through the trade markets. On canola, domestic values eased, with grower bids down $3-$4/t. The softening AUD has helped values on the bid side. Hot conditions are set for the next seven days through most of Western Australia, where harvest is continuing at a rapid past. South Australian temperatures will start to warm up over the weekend. The Victorian harvest is slowly approaching, with barley and pulses starting to come off with yields in line with expectations.