Overview of currency and futures markets:
Slight gains for grains, mixed for oilseeds.
- CBOT Wheat May contract was unchanged at 436c,
- Kansas wheat up 2.75c to 449.25c,
- corn up 2.5c to 366c,
- soybeans up 3.5c to 1001.5c,
- Winnipeg canola down -5.0$C to 505.8$C,
- Matif canola down -2.25€ to 406.75€.
- The Dow Jones down -15.54 to 20934.55,
- Crude Oil down -.089c to 48.77c,
- AUD down to 0.767c,
- CAD down to 1.33162c, (AUDCAD 1.02257)
- EUR up to 1.07715c (AUDEUR 0.7126).
Wheat slightly higher despite export sales below market expectations. Minneapolis wheat was the leader, which showed strength after export sales reported 103,000t to China, in addition forecast rainfall in Dakota could slow down (spring wheat) planting and potentially reduce acres, which the balance sheet cannot afford to lose.
Hard Red Winter (HRW) wheat priced 120,000t of Algerian business, which is supportive to current flat price levels. Weather wise, the forecast rainfall for next week in the wheat belt remains.
The market is considering the impacts of this on one hand, while evaluating the recent cold temps in Soft Red Winter (SRW) wheat areas on the other. It’s hard to see the market discounting new crop risk premiums (selling off futures) much more than current levels, considering the expectations that funds have added to their shorts this week, export demand is ongoing and new crop has a lot of weather to get through.
The oilseed complex was quiet overnight. Soybeans had some follow through buying from the previous day’s US dollar weakness. Weekly export numbers from USDA reported a new sale, which is good, considering the increasing export competition from the high volume South American crop.
Canola lower again overnight, despite a stronger palm oil market and stagnant dollar. Technical selling is the catalyst for overnight weakness and should see the January lows tested.
Corn stronger again, still riding the Chinese import story. Add to this the strong weekly export sales and ongoing ethanol demand and we should see support levels respected.
Barley and sorghum tilt towards exports, stronger prices
It will be interesting to watch feed barley pricing today after Saudi Arabia announced another tender for May-June delivery to purchase 1.5Mt. There has been chatter of recent Chinese enquiry, while export pace in Australia is already on track to break records. With grower selling slowing, it’s expected that this could be the catalyst for a decent flat price rally. Moving onto another Aussie feed grain, the demand for sorghum for Chinese alcohol production is developing, with container business being reported. If this continues it is very hard to see sorghum prices falling considering the inelastic domestic demand and the small crop size.
Wheat has export potential and remains strong in domestic consumption
So we have the potential to export the barley and sorghum balance sheets, leaving wheat for domestic consumption, though this is hard to see given ongoing demand for low-grade wheat based on our relative values into South East Asia, which helps to justify strength in Aussie prices.
Rain is still forecast through the next week
Weather wise the 8 day forecast for northern NSW and Qld looks to be getting better, though it only helps winter crop potential, it may encourage old crop sales as the moisture profile improves.
Source: Lachstock Consulting