Markets

Daily Market Wire 18 March 2020

Lachstock Consulting, March 18, 2020

Wheat and oilseeds markets were firmer.

  • Chicago wheat May contract up US1.25¢/bu to 499.25¢;
  • Kansas wheat May contract up 8.5c to 432.25¢;
  • Minneapolis wheat May contract down 0.5¢ to 509.25¢;
  • MATIF wheat May contract up €4/t to €179.25/t;
  • Corn May contract down 10.75c/bu to 344¢;
  • Soybeans May contract up 2.5¢/bu to 824.25¢;
  • Winnipeg canola May contract up C$5.30/t to $453.30/t;
  • MATIF rapeseed May contract up €8.75/t to €344.25/t;
  • Brent crude May contract down US$1.32 per barrel to $28.73;
  • Dow Jones index up 1049 points to 21237;
  • AUD weaker at $0.5990;
  • CAD weaker at $1.4246;
  • EUR weaker at $1.1010.

Market news

Are markets finally into “value” territory – or is this another dead cat bounce?

Coronavirus still has the world running scared, but the DOW did manage to pick up 1048 points overnight in the US after talk of yet another government stimulus program in the US.

Crude oil continued to collapse though, with WTI trading down a buck and three quarters to $26.9/Brent $28.7.

Ags were mixed, with KC seeing strong support to close up 8.5¢ to 432 1/4¢ after physical basis spiked and as talk of potential Chinese buying circulated.

Chicago was up a cent and a quarter to 499.25 though, Minny off half a cent to 509.25¢, and Matif +4€ to 179.25€ on the earlier close.

Corn crashed 10 3/4¢ to 344¢ and beans were up 2.5¢ to 824 1/4¢ (Matif rapeseed +8 3/4€ to 344.25€, Winnipeg canola +$5.3 to $453.3).

The AUD has fallen under 60¢ (59.8¢ currently), the CAD $1.423, and the EUR to $1.101 as the dollar index continues to push up to 99.8.

We also note that the BRL has continued it’s collapse, trading at 5.01 overnight as new lows continue to set.

Ongoing market problems from coronavirus have been as much a factor of the attempts to stop it as the virus itself.

That’s not to say that the world should not be worried, but logistics, demand, and general overall consumption have all been impacted.  The latest agricultural headlines report Egypt’s GASC is quarantining their inspectors.  Egypt’s wheat imports have been lagging for a while.

Brazil might shut slaughterhouses to avoid virus risks.

Worries also were expressed about the validity of CBOT cash indexes for cattle markets with actual physical sales being cancelled.  That is just one reason why we find the cash settled to index markets to be inherently suspect relative to physical delivery.

Argentina’s solution of sorts both allows grain exports and closes their borders, after earlier worries that closed borders would stop exports. But there is still plenty of confusion around.  Volatility and some irrationality look set to remain significant drivers.

Despite the board collapse, basis is finally starting to tell some stories in the US.

On one hand the bottom has seeming fallen out of the corn cash market.  The factors at play there include the ongoing ethanol problem, driven by weaker crude and ideas of weaker gasoline demand through coronavirus. Ethanol crushers were both pulling bids and dropping basis levels sharply.  At the same time there’s more talk about potential for idling of plants, particularly on the northern Great Plains.

On the other hand, wheat basis has now spiked higher amid discussion of possible Chinese business underway.  Wheat basis previously had held firm despite the weaker board.

Bean basis has been weak for several days now, but with the ethanol collapse and corresponding firmness into DDGs there’s been some flow through support into cash bean meal. Meal has helped support bean crush margins.

Firmer beef cut-outs are also starting to gain some focus, with hopes that we may be seeing the bottom of the feeder collapse.

Australia

Australia’s markets have gradually ratcheted higher with help from the weakening dollar. There was a spurt of wheat buying late yesterday.  Weather maps are improving a little bit for SA into early next week – will see if anything better comes out there.

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