Lower for grains and oilseeds as macro uncertainty encourages risk-off behaviour.
- CBOT wheat down 9.5c to 532.25c,
- Kansas wheat down 10.5c to 535.25c,
- Corn down 0.75c to 361.5c,
- Soybeans down 10.75c to 857.5c,
- Winnipeg canola down C$3.50 to $504.10,
- Matif canola down €1.25 to €380.25,
- Dow Jones down 189.07 to 25110.84,
- Crude oil down US$2.03 to $65.01 per barrel,
- AUD down to 0.723c,
- CAD up to 1.313c (AUDCAD 0.950),
- EUR up to 1.134c (AUDEUR 0.637).
Wheat suffered further selling with limited new fundamental inputs today. Macros and technical weakness were the major contributors, with USD strength making it more of a challenge for US wheat to find demand. Implied volatility in September Soft Red Winter finished at 27.36 per cent. Matif wheat fell €0.75 to €204.75 in quiet trade with most of Europe on holiday. Black Sea futures were down US$2.50 per tonne. In Russia, the government is meeting next week to discuss trade, which could result in some form of export restriction on grain exports, given the weakness in its ruble, and potential for this to continue and rally the domestic price. The US found some demand, with Hard Red Winter wheat trading into Iraq in a tender that did not allow Russian wheat.
Corn showed resilience in overnight trading and finished fractions lower, despite general outside market weakness, as yield question marks discourage bears. A private export sale to an unknown buyer of 114,000t was announced, which gave the market some encouragement. Ethanol production dropped 2pc from last week as stocks build to three-month highs. Price action in corn suggests that the market is factoring in the USDA’s recent yield forecast as the highest of the season. If true, this would not be the first time that the final yield has been significantly lower than the USDA’s August figures. In 2010, the final yield came in 7pc lower.
Soybeans suffered further selling, with macro weakness combining with decent rainfall in the corn belt to add sell-side weight, despite a very strong monthly crush figure in the US. With copper and crude oil down 2.9pc and 3.8pc respectively, there was little hope for ag commodities as the CRB core commodity index dropped to a two-year low. Macro uncertainty in Turkey continues with ongoing weakness in its currency, and the latest development being that Turkey is looking to impose a 120pc import tax on US cars. The US dollar gained significantly on other currencies, which saw new lows formed in the ruble and Indian rupee, as investors seek safe assets amid fear that Turkey’s financial crisis will spread to other developing economies. Soymeal was down $4.30/t, and soy oil dropped 40 points.
Canola was caught up in macro and vegoil weakness, with relative falls in both contracts. We have not heard of any weather improvements in Canada as yet, but finding a new bid was difficult, given the overall risk-off nature of commodity trade overnight.
Aussie markets were quiet yesterday, with sellers not dropping prices on last week, and consumers finding it hard to pay up given the weakness in outside markets. The eight-day forecast is offering nothing of substance and is getting us dangerously close to the end of August with no rainfall. Production ideas for the east coast can only go down without any rainfall. This will increase interstate imports, which will support Western and South Australian prices, and reduce Australia’s exportable surplus. This should have a bullish impact on global futures prices, given how tight the global balance sheet is, but we might need to get macros out of the way and see a fund short build back into markets before this becomes a focus.
Source: Lachstock Consulting