Daily market wire 15 September 2017

Overnight markets:

Mixed for grains, higher for oilseeds.

CBOT wheat down 0.25c to 443c,
Kansas wheat down 2.25c to 442c,
Corn up 2.75c to 354.25c,
Soybeans up 15.5c to 976c,
Winnipeg canola up 1.19$C to 495$C,
Matif canola up 2.25€ to 368.25€,
Dow Jones up 45.29 to 22203.48,
Crude oil up 42c to US$49.72,
AUD up to 0.799c,
CAD up to 1.217c (AUDCAD 0.974),
EUR up to 1.191c (AUDEUR 0.671).

Wheat

Winter wheats finished with slight losses after weaker-than-expected export sales, combined with falling spring wheat values, which added offer side pressure. Implied volatility in Dec Soft Red Winter (SRW) wheat went out at 20 per cent. Like yesterday, SRW started the session in strong fashion, testing nearby resistance at 450 before settling well off its highs. Russian cash prices and corn were both stable, which makes the weaker close somewhat surprising. Hard Red Winter (HRW) wheat saw some obscure demand, with Turkey purchasing 50,000 tonnes; this marks their first HRW import in five years. It was surprising that Russian wheat did not price into this market, given its proximity and relative value. Canada’s wheat crop is increasing, with some calling it 28-29 million tonnes (Mt), although the quality profile suggests that the surplus will be 10-10.5pc protein wheat, which will have a lot of export competition to contend with. Argentina’s flooding is creating issues for wheat and potential harvested area. The market is starting to pay more attention to the economic signals that current prices are giving for new-crop plantings. Wheat needs to break 450 in Dec SRW soon, or we may see a reversal, though it’s hard to argue considerable downside with cash prices behaving as they are.

Corn

Strength in beans, combined with new crop concerns and stronger macros to rally corn. Export sales better than expected at 1.05Mt vs. ideas of 950,000t. Dry conditions in Brazil and flooding in Argentina have raised doubts for new-crop corn production. There was no news for corn; the balance sheet is heavy, so today’s rally was a surprise. Profit taking in the wheat-corn spread could have also contributed.

Soybeans

Beans closed stronger as export sales came in at 1.61Mt vs. ideas of 1.2Mt and highlighted the level of underlying export demand. China’s portion of the weekly sales was 1.2Mt. The break brought on by the higher yields in Tuesday’s report encouraged a large amount of new Chinese price inquiry, which has seen beans rally 41 cents per bushel off their report lows. A private sale of 198,000t of 2017/18 beans was announced to China. Other catalysts for the rally are concerns for new-crop South American production, where it is too dry in Brazil and too wet in Argentina.

Australia

The Australian forecast features some minor showers for southern Western Australia, but nothing in NSW or Queensland. Northern NSW has some frost potential in the next two nights that will increase pressure on an already-stressed crop. If the Aussie wheat markets starts seeing some inelastic demand seeking cover for Dec/Jan shipments, then basis appreciation will continue. The domestic market cannot afford to lose too much wheat or barley this year, and history suggests that importers’ appetite for Australian grains will maintain itself.

Source: Lachstock Consulting

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