Markets

Daily Market Wire 16 December 2019

Guest Author, December 16, 2019

Friday futures again mostly firmer.

  • Chicago wheat March contract up 2.25 cents per bushel to 532.5c;
  • Kansas wheat March contract unchanged at 442.75c;
  • Minneapolis wheat March contract up 2.75c/bu to 525.75c;
  • MATIF wheat March contract unchanged at €183.25/t;
  • Corn March contract up 3.25c to 381c;
  • Soybeans January contract up 9.25c/bu to 907.5c;
  • Winnipeg canola January contract up C$1.90/t to $461/t;
  • MATIF rapeseed February contract up €0.75/t to €400/t;
  • Brent crude February contract up US$1.02 to $65.22 per barrel;
  • Dow Jones index up 3 points to 28135 points;
  • AUD weaker at $0.6880;
  • CAD weaker at $1.317;
  • EUR weaker at $1.113.

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Volatile times to end the week – Chicago wheat closed up two and a quarter cents to 532.50¢, KC unch at 442 3/4¢, Minny +2 1/4¢ to 525 3/4¢, and Matif unchanged at 183.25€ on the earlier close.  Corn ended up 3 1/4¢ to 381¢ and beans were +9 1/4¢ to 907.5¢ (Matif rapeseed +3/4€ to 400€, Winnipeg +$1.9 to 461).  The DOW closed up three points while WTI is trading around $60.1, Brent $65.2.  The AUD is slightly weaker to 68.8¢, the EUR at $1.113, and the CAD at $1.317 while the dollar index has moved towards 97.2.

Most of the US/China partial trade deal is still extremely vague which leads many to question if anything actionable will happen.

As best as Lachstock has been able to see:

  • Planned tariff increases are to be kicked off the near-term risk table
  • Partial tariff reductions from both sides are to be implemented after the agreement is actually signed
  • China has generally agreed to make some improvements to their policies
  • The US administration claims that China has agreed to effectively double their purchases of US ag products through the next two years.

Importantly, we note that nothing from the Chinese side that has become public appears to commit to serious changes or significant ag purchases.

There’s nothing yet signed, and we’ll see how the deal comes out – but market scepticism is unlikely to go away until more concrete terms are made public.

In the meantime, there’s been another snag in the new NAFTA agreement. Mexico objected over the weekend to any monitoring of Mexican labour conditions.

Argentina’s new government has officially increased their export taxes across the ag sector, increasing rates on beans, corn, and wheat by 5pc, in a bid to plug their budget holes.

The market had been expecting something to happen here since the election, so now we’ll see how the official actions impact the coming bean export program.

The Argentine peso is still about 50pc weaker than it was earlier this year, with the ongoing economic and political problems there.

The coming year will be an interesting one with large debts coming due and obligations to the IMF that the new president has announced intentions to change.

Russian grain politics are also back in the news, with comments from the ag ministry about new methods to monitor and potentially restrict grain exports.

Nothing firm in the meantime, but this has been something that’s been idly discussed throughout the year with various comments from the government and (Russian bank) VTB’s ongoing expansion into grain all raising concerns.

Physical grain markets are generally quietening down into the year’s end and holidays.  Updated CFTC reports (through Tuesday) though saw fund positions increase their shorts pretty much across the board, with the corn short (aggregate) down another 30,000 contracts to115,000 contracts short, KC down 10,000 to 24,000 short, beans -13,000 to -112,000, and the Chicago long down 9,000 contracts to 11,600 long.

Interestingly, most had expected a cut to the bean short.  It’s further into new record territory for this time this year.  Generally a futures rally corresponds with reductions to shorts in the fund side, but not this time.

Australia

Local harvest conditions over the weekend saw more growers get a good run at it through large parts of the country.

Western Australia was hit with high temps however it was already at the back end of its harvest.

South Australia and Victoria got a good run before the heat wave hits particularly in SA where temps are set to push well and truly into the 40s throughout most of the state for the week ahead.

Western Victoria where canola harvest is the focus had some showers and cooler conditions to cause some moisture issues and slow progress up.

Markets continued to gain to finish the week up strongly and with another week ahead of potential fire ban days this could delay harvest and see more shortfall for the prompt domestic slots.

 

 

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