Daily market wire 14 Sep 2016

Lachstock Consulting, September 14, 2016


Since Friday, markets around the world have been in de-risk mode as the US fed reserve made comments that strengthened the chance of an interest rate increase in December.

All commodities across the board find themselves deep in red territory after a brutal night in the trenches.

Given the AUD is correlated highly to commodities we also saw the AUD fall under 75 cents last night.

For Australian grain growers, to sell crops this year with profitable margins a lower AUD will be well received to encourage export demand to soak up potential large surplus’ around the country.

Tomorrow will be last trading day for the September contracts in grain futures, and the December contract will become the lead month.

Any hedges held by Australian growers in the December contract should be deep in the money after the large sell off seen over the last 6 months.

External pressure today and the Firmer USD, removed buying interest from grains and oilseeds despite strong export demand seen at current prices.

CBOT Wheat was down -8.25c to 401c, Kansas wheat down -8.0c to 415.6c, corn down -9.5c to 330c, soybeans down -20.25c to 944c, Winnipeg canola down -$C2.60 to $C456.50, and Matif canola down -3.75€ to 371.5€.

The Dow Jones down -258.32 to 18066.75 , Crude Oil up 0.28c to 45.18c, AUD down to 0.7459c, CAD up to 1.3165c, (AUDCAD 0.9820) and the was EUR up to 1.1216c (AUDEUR 0.6649.

The potential weather concerns in Australia have seen a strong rally in ASX wheat markets after strengthening $3.20 to $233.50 in Eastern Australia.

Areas of the Central West in NSW already find themselves teetering on the edge after the rainfall events of the past two weeks. Many of these already troubled regions are staring down the barrel of well over 50mm in the next few days which may prove to be catastrophic for some crops. There are already instances of lodging in the area which may become more prolific in the upcoming week.

It’s not all doom and gloom as many growers on the outskirts of the heavy downpours are cashing in with optimal rainfall figures. If rainfall is more than 2-3 inches in regions with large chickpea plantings, there is the potential to wipe ~0.75mt ha from supply prospects, which is bringing washout requests to the market.

The lack of liquidity in the chickpea market means that growers may face washout levels close to $100mt above prices seen last week. Despite a small frost event in WA and some localised flooding in Vic, crops prospects for WA , SA and Vic continue to improve overall which is more than offsetting production losses in Qld and NSW at the moment.


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