- CBOT wheat up 8.25c to 512.25c,
- Kansas wheat up 6c to 515c,
- Corn up 4.5c to 359.75c,
- Soybean up 9.75c to 845c,
- Winnipeg Canola up 1.30$C to 494.7$C, and
- Matif canola up 0.25€ to 360.25€.
- The Dow Jones up 55.52 to 25119.89,
- Crude Oil down -0.45c to $US67.61 per barrel,
- AUD down to 0.738c,
- CAD up to 1.319c, (AUDCAD 0.974) and the
- EUR down to 1.165c (AUDEUR 0.633).
Wheat finished stronger led by higher European and Black Sea markets. Implied volatility in Sep Soft Red Winter wheat went out at 30pc.
Ongoing production declines prompt further strength in Europe with Matif futures finishing €2.75/t higher at €188.75/t, just €2.0/t shy of the 3-year highs.
Black Sea values were also higher with Feb trading at US$232/t free on board.
As harvest continues in the Black Sea the absence of protein wheat is being noted, as well as in Europe. This will make things interesting for US demand later in the season.
The flat price increase in the Black Sea is doing good things for Australian export demand given our freight advantage into South East Asia.
This market is performing the function of limiting demand, thanks to decreasing supplies.
Alternatively, Argentina’s production potential has improved with the Rosario Grain Exchange increasing their estimate to 20 million tonnes (Mt) (USDA 19.5Mt), this production increase is unlikely to offset the declines seen in Australia, Europe and the Black Sea.
We expect ongoing fundamental support in the wheat markets, if macro uncertainty doesn’t pull it lower.
Corn managed a stronger finish with condition rating declines prompting similar price action to that in beans.
The market has been led to this price glut by expectations of record US yields and demand uncertainty, but the broader picture points to a very tight global balance sheet which will depend on US supplies once friendly export partners are exhausted.
If the yields are lower than expected and the US government introduces price support mechanisms for farmers, then they could potentially hold the world market to ransom.
Soymeal was unchanged at $329.10/t, while soy oil was up 7 points. The decline in crop conditions carried through to last night’s session, coinciding with seasonally strong export figures to encourage a short covering task.
The weather forecast is not showing anything threatening for the next 8 days, which could make this run short lived.
Canola finished with slight gains in both European and Canadian contracts. The European and Black Sea yield declines that are influencing wheat are also being felt in EU Canola, but that spread has done a lot of work relative to Canada. For now, both contracts remain followers of outside influences.
Aussie markets continue to find domestic strength from disappointing weather in NSW, SA and QLD, whilst also finding support in the export states from increases in global flat price.
As previously discussed the east coast market cannot afford to let too much of our exportable surplus go without getting its own fill, so crop declines in Europe and the Black Sea need close attention from the Australian consumer.
The world wheat market is looking like it’ll need to pry US wheat from the hands of stubborn warehouseman who have a good thing going thanks to the Variable Storage Rate (VSR).
If they prove resilient and the Australian consumer doesn’t cover, then we could export more than we can afford to.
Source: Lachstock Consulting