Wheat futures led markets sharply lower offshore overnight; Tuesday’s settlements as follows.

Futures markets simply gave up last night. Post a range-bound period where the market was balancing good to excellent new crop prospects against a huge fund and consumer short the one two punch of Russian and German private analysts increasing the size of their crop was too powerful. CBOT Wheat was down -14.5c to 445c, Kansas wheat down -10.25c to 417c, corn down -3.75c to 359c, soybeans down -10.75c to 888c, Winnipeg canola up $C to $C, and Matif canola down -1.5€ to 359.75€. It’s worth noting that last night’s moves will be captured in Fridays CFTC Commitment of Traders Report – the record fund short will almost certainly get larger – however, this is becoming the only reason for the market to rally at the moment. The Dow Jones up 67.8 to 26452.66 , Crude Oil up 0.18c to 64.23, AUD up to 0.7176c, CAD down to 1.33503, (AUDCAD 0.95793) and the was EUR up to 1.12866c (AUDEUR 0.6357).

Looking to canola, the crop estimates announced by German co-op, DRV suggest their rapeseed output would fall to 3.24 million tonnes (Mt), due mainly to the poor moisture in fall. To put this in context, in 2014/15 Germany produced a little over 6Mt and has seen the output ratchet lower every year. This becomes a little more interesting as the Canadian grower enters the planting window with the ongoing dispute between China making the price outlook pretty grim.

The new crop market woke up from its slumber on the east coast. ASX opened offered at 335 but quickly traded 334, 335 and then through 339. With domestic strength and the carnage in offshore futures markets basis has rocketed higher. Basis has rallied over AUD$20/mt basis last nights closes and yesterdays Jan-20 ASX market since the beginning of the month. 8-14 day forecasts are still providing little in the way of relief from SA through to Qld. Its not just ASX that is reflecting this strength with Jan-20 delivered Melbourne F1 barley starting the day bid around AUD$285/mt but eventually closing the day bid over AUD$295/mt with nothing meaningful offered. While the back to back droughts of 05/06 and 06/07 give us some insight into how the new crop markets should behave this is still largely uncharted territory. The extent of the 18/19 east coast drought and the efficiency with executing WA inventory into the east make this year a different proposition, especially from a basis perspective. To this point, predicting old crop values in the event of a late/disappointing break with the backdrop of northern hemisphere availability is difficult at best.