Daily market wire 18 October 2017

Lachstock Consulting, October 18, 2017

Overnight markets:

Lower for grains, mixed for oilseeds.

  • CBOT wheat was down -1.75c to 434.75c,
  • Kansas wheat down -0.5c to 433.25c,
  • corn down -0.5c to 350c,
  • Soybean down -6.25c to 995.25c,
  • Winnipeg Canola up 0.70$C to 506.1$C,
  • Matif canola down -0.25€ to 365.75€.
  • The Dow Jones up 40.47 to 22997.44,
  • Crude Oil up 0.08c to 51.95US$,
  • AUD down to 0.784c,
  • CAD up to 1.252c, (AUDCAD 0.982)
  • EUR was down to 1.176c (AUDEUR 0.666).


Wheat finished with slight losses in mild session that featured limited fresh inputs. Implied volatility in December Soft Red Winter wheat futures went out at 17.5 per cent. Hard Red Winter (HRW) wheat premiums continue to build as offer side liquidity is limited, due to more attractive cash and carry opportunities brought on by the introduction of the variable storage rate in HRW futures. Offers into the Iraq tender revealed HRW as the cheapest at US$299/t cost and freight (cnf), while Aussie trailed close behind at US$301.25/t cnf. At this point nothing has been booked. Russian prices remain stable, despite forecasts for wheat exports greater than 32.5 million tonnes. The weather will play a crucial part in this execution ability, but for now the market appears to be quite resilient.


Corn finished just below unchanged, with the market looking to fresh fundamentals for some direction. The USDA announced private sales of 146,000t to unknown and 115,000t to Mexico. The weather forecast for Brazil improved which added sell side pressure, but further unwinding of the bean corn spread, kept things well supported.


Beans were lower, on the back of improved rainfall in central Brazil, with more on the forecast. Meal was down US$2.90/t and oil was unchanged. The key soybean US$10/bushel technical level that was broken last week could not sustain itself, with the Brazilian forecast too much for new longs to buy through. There are rumours that China has been buying old crop Brazilian beans, which would explain the limited daily sale announcement for US beans and prove unsupportive from a price perspective.


Canola finished with mild gains, but could not break away from the negative drag of beans. As harvest in Canada winds up it’s expected that basis should increase with grower liquidity declines, but the market is still hanging out for Chinese demand, which can make or break things from a pricing point of view.


The Aussie forecast is dry in WA, SA and most of Vic, but quite heavy across NSW and QLD. Despite the full summer plant that recent rainfall and the forecast guarantees, it is likely now to impact winter crop quality, which is relatively unharvested. If this downgrades high protein wheat then it will place upside pressure on grade spreads given the inelastic demand profile for prime hard. Cash prices have stabilised since the falls of last week, where Victorian pricing fell sharply against SA, WA and Black Sea values. With concerns now building for crops in the Mallee it’s expected that premiums should start to creep back into the Vic market.

Source: Lachstock Consulting


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