Overnight futures markets
Mixed for grains, higher for oilseeds.
- CBOT wheat up 4c to 466.25c,
- Kansas wheat up 2.5c to 480.5c,
- Corn down 1.75c to 389.25c,
- Soybeans up 4c to 1046c,
- Winnipeg canola up C$0.5 to C$521.3,
- Matif canola up €1.5 to €344
- Dow Jones up 213.59 to 24786.63,
- Crude oil up 45c to US$66.67 per barrel,
- AUD down to 0.776c,
- CAD down to 1.255c (AUDCAD 0.975),
- EUR down to 1.237c (AUDEUR 0.628).
Wheat futures recovered some of yesterday’s losses, although weather forecasts remain positive for Hard Red Winter (HRW) wheat-growing areas. Yesterday’s crop conditions were at market expectations but, given the market’s structure with increased longs, profit-taking and panic is expected on neutral, or non-bullish, information. The forecast remains wet, with good coverage for HRW areas, while the Northern Plains forecast looks to be drying out, which could enable forecast spring wheat plantings. Implied volatility in July Soft Red Winter wheat went out at 24.8 per cent. In Europe, cold and wet conditions have prevented timely sowing, which is threatening an area reduction, with Germany plantings rumoured to be down 15pc. Tunisia bought five cargoes, three old-crop at US$230 per tonne c and f, and two new-crop at $221/t, an inverse not as large as the Russian fob market is suggesting.
Corn continued to grind lower, with a long market and bearish trade news adding pressure. China put in place a duty on US sorghum imports which forces those bringing it into the country to pay enormous deposits. This was said to be an outcome of the anti-dumping investigation, but the market is sceptical, given the other global feedgrain imports which are not being scrutinised. Brazilian corn offers are becoming cheap when compared with US corn beyond July, which should eat into some export share, and could see US corn carryout not as low as recent estimates have suggested. Weather in the US remains inhospitable to planting, with heavy snow plaguing most of the corn-producing areas and limiting area potential.
Soybeans finished fractions higher in a low-range session, with meal providing the support. Meal was up $3.30/t, while oil was unchanged. New actions from China in regard to US sorghum sparked fresh concerns for the bean-tariff debate. The market is not expecting China to follow through with its bean tariff threat for the US, with most thinking they cannot afford to lose US beans. However, it is very hard to trade politics, and the market has responded, reducing risk and awaiting further clarification.
Canola followed price action in beans to finish fractions higher in a mild session. Talk of increased Chinese buying interest out of Canada was supportive of futures, as were revised US-China trade concerns.
Cash markets in Australian continue to show strength as the eight-day forecast keeps delivering nothing. China’s import restrictions on US sorghum could create more short-term demand for Aussie feed barley, given that there could be 500,000t of US sorghum on the water that will need to be repositioned to other origins. This should create deficits at Chinese ports, which could open up import margins. Wheat is a pillar of strength at the moment, trading over export parity on fears of low new-crop volumes. The fact that limited pasture is promoting increased sheep and cattle feeding is adding to the bullish hype. The wheat balance sheet on the east coast feels tighter than it is, with growers not selling, and buying to feed their makeshift sheep feedlots. We are trading a drought in April, which seems absurd if we get rain in a month, but if we don’t then today’s prices will look cheap.
Source: Lachstock Consulting