Wheat finished with moderate gains as Egypt’s GASC bought twice their usual quota, resetting global flat prices higher. Today’s session was technically unconvincing with the market consolidating, pausing for breath before the next move. Implied volatility in Sep Soft Red Winter wheat finished at 29.5pc. Matif wheat was up €0.75/t to €205.5/t. We learnt nothing that we don’t already know in this session. The global wheat balance sheet is going to be at record lows with most of the exportable stocks located in the US. Russia’s export pace needs to be monitored closely as government intervention is not out of the question if we see a rapid increase in export flow and price there. It’s unlikely that US prices will fall to capture export demand, it will be the job of the global consumer to push things higher and rally spreads to levels that discourage VSR-driven storage revenue. We have no notable improvement in global production with dryness in Eastern Australia and Canada making further declines more likely than not.
Corn finished higher in a convincing session as the market prices in the risk of a lower yield than the USDA forecast on Friday. Next week US crop tours get underway and some models are suggesting much lower yield results than the recent yield forecast of 178.4bpa. This figure was well above market expectations, so if the tours reveal any variations then we’d expect to see a prompt price response. Weekly conditions results had corn down 1pc at 70pc good to excellent. Corn will become more of a focus over the next month and has the potential to highlight the large holes in the global feed grain balance sheet, which could be met with volatile consumer behaviour.
Beans finished higher with strength in meal helping to encourage bids in “turnaround Tuesday” trade. Argentina suspended its gradual reduction in export taxes, which helped to encourage the rally in meal. US bean conditions were 66pc good to excellent, down 1pc on the previous week. While 84pc of the crop is setting pods which is well ahead of the 72pc average for this time of year. Today we rallied on meal, but US conditions in beans are looking fantastic and should weigh on prices in a low demand environment. The first US cargo of beans to China has landed since the revised tariffs and this week the importer, Sinograin, will pay a US$6 million import tax. Soymeal was up $7.20/t and soy oil was down 15 points.
Canola finished higher led by European futures that found a bid reversing the previous days weakness, filling the technical gap and looking to make a push for recent highs. The European balance sheet is in continual decline and yesterday’s macro inspired weakness marks good buying. Canada futures followed beans and Matif, with a lower currency and increased dry hot conditions helping.
Aussie markets were quiet yesterday after weakness in CBOT saw buyers back off and sellers remain unchanged. The 8-day forecast continues to offer nothing tangible for the east coast and production forecasts in NSW are in constant decline. Consumer coverage on old crop is still incomplete which is depleting available supplies in SA and WA to the point where there are few options left. Victorian old crop is too expensive to work onto the Darling Downs but well bid thanks to NSW demand. With continued old crop demand and reductions in new crop production potential, it’s difficult to see significant near-term downside.
Source: Lachstock Consulting