Markets

Daily Market Wire 17 September 2019

Lachstock Consulting, September 17, 2019
Futures markets took a solid turn upwards on Monday.
  • Chicago wheat December contract up 5.25 cents per bushel to 488.75c;
  • Kansas wheat December contract up 9.25c to 409c;
  • Minneapolis wheat December contract up 18.25c to 523.75c;
  • MATIF wheat December contract up €1.50 per tonne to €171.75;
  • Corn December contract up 5.25c to 374c;
  • Soybeans November contract up 1.25c to 900c;
  • Winnipeg canola November contract up C$2.90 to $452.70;
  • MATIF rapeseed November contract up €4.50 to €388;
  • Brent crude December contract up $8.80 per barrel to $69.20;
  • Dow Jones index down 142.70  to 27,076.82points;
  • AUD weakened to US$0.6855;
  • CAD weakened to $1.3253;
  • EUR weakened to $1.1005.

Wheat, soybeans, corn and crude

Low volatility and tight trading ranges are now a thing of the past. The hit on Saudi Arabia’s oilfields is the catalyst, but the second-order event that drove the Russian ruble was the driver in the wheat market. Russian cash markets were nominally $3/t higher which, when added to the southern hemisphere woes, was enough to take futures higher. How the wheat market reacts to ongoing tension is hard to predict; on the one hand, a flight to safety is generally supportive of the US dollar, and bearish for exportable commodities.
In this case, the main global competition for wheat is Russia, and the ruble’s move is ultimately supportive to global values, given the link to Russian energy. Technically, the market is overbought, and will need a decent reason to take the next leg higher.
Corn is interesting; it’s the linkage to crude oil prices when crude gets a rattle on is generally pretty good. At the moment, with a lack of weather concerns as harvest kicks off, it has largely lagged the move. With the added variable of Donald Trump’s Renewable Fuel Standard, changes to corn could do anything. It’s generally about now you get those “the US needs to be energy self-sufficient” arguments, which could certainly influence the look and feel of ethanol demand and applicable mandates going forward.  However, this ignores how horrible current ethanol margins are, so it’s nothing short of a dog’s breakfast.
US-China trade negotiations will have their next instalment on Thursday and Friday, with a delegation due to catch up. Meanwhile, soybean sales keep ticking along, and are now a daily feature.

Australia

Cold snaps occurred last night in parts of south-east South Australia, and also Victoria, with some key areas spending 3-4 hours below 1 degree Celsius. Affected districts include Lameroo, Keith and Horsham. Although these areas are in great shape, there is a wide range of crop maturity, and any crops just starting to flower will not like a frost.

 

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