Friday’s futures markets closes:
Lower for grains and oilseeds.
- CBOT Wheat down -4.5c to 530.25c
- Kansas wheat down -7.25c to 532.75c
- Corn down -1.5c to 388c
- Soybean down -3.5c to 989.25c
- Winnipeg Canola down -1.10$C to 510.2$C
- Matif canola down -3€ to 368€
- Dow Jones down -8.020 to 21629.72
- Crude Oil down -0.549c to 45.99c
- AUD down to 0.779c, CAD up to 1.269c, (AUDCAD 0.989)
- EUR up to 1.148c (AUDEUR 0.678).
Soybeans lower on the COT position surprise announced after Fridays close. A short structure has been a staple in grains and oilseed markets of late, so we need to adjust to the new normal, or, funds get short again.Nothing telling from soybeans on the technical front, looks like things are chopping until market decides to fill the gap at 963 in Nov, or find something to rally behind. The only standout potential catalyst for a rally is weather, though August weather is most important for beans and while the long term forecast looks hot and dry, it is too far out to warrant much confidence.
Canola led lower by the oilseed complex, despite a weaker dollar. Some minor improvements in Prairie weather conditions featured some patchy showers, but not enough to assist yields at this stage.
Corn slightly lower, with minor weather improvements. The outlook at present is mixed with eastern parts of the Corn Belt in good shape, while the north western areas are thirsty. Its interesting that the market consensus is that yields will be below that forecast by the USDA last week, but no risk premium is priced in, with the Sep contract only 9 cents off its yearly low. This is the problem with a long COT structure (corn switched from -83k to +49.3k contracts in a week as grower liquidity enabled funds to unwind and reverse their positions), US corn is not pricing any export business, so the only thing to encourage further buying is weather, which is not extreme enough for the moment. Unless we see some kind of left field surprise like an EPA mandate change, the only thing that will rally this market is extreme weather or export demand.
Winter wheats were lower, both closing above lows at their 50% retracement levels, which is the high reached in Feb. Spring wheat was up 9 cents, as the Northern Plains forecast was hotter and dryer than expected. HRW was the worst performer after the COT on Friday that revealed a significant increase in the long position here. With the crop protein reported as low, plus a large old crop balance sheet, it’s difficult to find a fundamental driver that will tighten this balance sheet in a hurry. Wheat might get some support from corn as it gets through pollination, but the real drivers going forward will be production in the major 8 wheat-exporting nations. The market is not expecting any surprises from Europe and the Black Sea, so Australia and Canada will be in the spotlight until things become clearer.
Nothing new for the Aussie forecast, patchy showers for WA and SA, but not in the thirsty areas. NSW has nothing in the next 8 days, which will fuel ongoing concerns there. Aussie basis is continuing to show strength in new crop, with limited grower liquidity, the market is hard to define and easy to overdo.
Source: Lachstock Consulting
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