Oilseeds markets continued to fall.
- Chicago wheat March contract up 4.75 cents per bushel to 573.25c;
- Kansas wheat March contract down 0.5 cents to 496.5c;
- Minneapolis wheat March contract up 0.25c/bu to 556.25c;
- MATIF wheat March contract up €1 to €195.25/t;
- Corn March contract down 1.5c to 387.5c;
- Soybeans March contract down 13.5c to 928.75c;
- Winnipeg canola March contract down C$5.70/t to $475.80/t;
- MATIF rapeseed February contract down €8.50/t to €409/t;
- Brent crude February contract up $0.50c per barrel to $64 per barrel;
- Dow Jones index up 91 points to 29030 points;
- AUD stronger at $0.6910;
- CAD stronger at $1.304;
- EUR stronger at $1.115.
The US/China deal phase 1 was signed and markets were unimpressed.
There was not much fundamentally surprising in the text released after the signing. As has been the case so far with the deal it was heavy on concept and light on details that mattered to markets. The market wanted to hear specifically about implementation of the promised purchases they’re hoping for.
On the close, Chicago wheat ended up 4 3/4¢ to 573 1/4¢, KC – 3/4¢ to 496.5¢, Minny +1/4¢ to 556 1/4¢, and Matif +1€ to 195.25€. Corn gave up a cent and a half to 387.5¢ and beans dropped 13.5¢ to 928 3/4¢ (Matif -8.5€ to 409€, Winnipeg -$5.7 to $475.8). Crude oil was off half a buck to $57.8/$64 and the DOW picked up another 91 points to set a new record high. The AUD is trading at 69.1¢, the CAD $1.304, and the EUR $1.115.
The headline trade deal figures included Chinese obligations to buy an additional US$12.5bn in ag products (relative to 2017 totals) in 2020, and $19.5bn in 2021.
There is still no clear indication as to what/how they will make these purchases. The deal included language that purchases would be made “at market prices” and conditions. So far there hasn’t been anything immediate in the market to indicate that they are buying, though we do note that there were two boats flashed.
South American bean harvest is right here, so bean markets in particular were somewhat disappointed by the implication that there will most likely not be immediate purchases of US beans until after the ex-harvest South American glut passes.
If the terms of this deal are truly followed, we should be looking at a massive cash basis appreciation into the end of the year as they work to fill the commitments, but markets have so far remained sceptical.
Lachstock also notes the included terminology on TRQs, with China committing to more fairly allocate them to the market, and to reallocate unused volumes to interested parties. TRQ volumes may not move directly to the US but, at current prices in China, they should be fully utilized and stand to add significant tonnage to overall global demand.
Outside of the China deal, markets were relatively quiet in agricultural commodities. The Russian government has resigned. New “reforms” are proposed but there’s been no direct worries on grain markets and the ruble is still slightly stronger than it was a month ago. French rail strikes remain in play as more talks are coming but no resolution yet. There were reports the other day that some feed mills had shut down given logistical problems with supplies.
Back locally, rains continued to fall through yesterday across inland Queensland, NSW, and central Victoria, though spotty coverage has disappointed some.
Big rains are still on the radar for NNSW and southern Queensland this weekend though – last runs pushing for wide spread accumulation >50mm in NNSW but slightly weaker into the Queensland’s Darling Downs.