Markets

Daily market wire 19 April 2018

Lachstock Consulting, April 19, 2018

Overnight futures markets

Higher for grains, mixed for oilseeds.

  • CBOT wheat up 7.75c to 489.25c,
  • Kansas wheat up 8.25c to 507.75c, 4c to 466.25c,
  • Corn up 2.5c to 391.75c,
  • Soybeans down 4.25c to 1041.75c,
  • Winnipeg canola up C$3.20 to $527,
  • Matif canola down €0.25 to €343,
  • Dow Jones down 38.56 to 24748.07,
  • Crude oil up US$2.23 to $68.75 per barrel,
  • AUD up to 0.778c,
  • CAD up to 1.262c (AUDCAD 0.982),
  • EUR up to 1.237c (AUDEUR 0.628).

Wheat

Wheat caught a bid, finishing just above its 200-day moving average. Weather forecasts for the southern plains have eased somewhat, with lower volumes and coverage expected for the parched winter-wheat areas. Fire warnings in Oklahoma are making national headlines in the US, which saw increased buying in Hard Red Winter wheat contracts. The majority of the moisture is forecast to fall over the weekend, so this should make for a wild open on Monday morning if any deviation is noted. Implied volatility in May Soft Red Winter wheat went out at 26 per cent. In Europe, reports of 15pc losses in German area have been revised to 5pc, in line with market expectations. Russian values are steady on old-crop at US$215 per tonne, while new-crop in August remains $15/t below. Tomorrow’s report is expected to put weekly export sales at 225,000t.

Corn

Corn finished fractions higher. In contrast to the southern plains, northern plains are enduring blizzard-like conditions which continue to threaten corn planting. A snowstorm is forecast for the corn belt, with up to 25 centimeters expected, and it’s getting to a point where we will definitely lose corn area, with the only question being how much. The blow-out from China’s sorghum import restrictions is mixed, with questions regarding where to re-home approximately 1.2 million tonnes (Mt) of sorghum which was sold, with about half of it already on the water. Looking further ahead, the China dispute is sparking an area debate, given that new-crop sorghum is not yet planted. There is potential here for proposed area to be substituted with wheat, although growers may not be as responsive to recent price action if they have a set rotation in mind. Weekly corn sales are expected at 950,000t.

Soybeans

Soybeans finished lower, and with the US-China trade-war uncertainty encouraging a risk-off sentiment, soymeal also weighed fairly heavy weight on values. One school of thought on the trade said China did not need US beans in the near-term, so if they were to enact a tariff, it could see a large glut in demand and increased old-crop carryout. Soymeal was down $4.2 per tonne, while soy oil was up 24 points.

Canola

The market is expecting 1.15Mt in tomorrow’s weekly export sales. As the trade concerns put pressure on soybean demand potential, they did the opposite for Canola, with a lower dollar providing further assistance. The Canadian dollar was down 0.6pc as the Bank of Canada left interest rates on hold. Canola has a busy nearby stem, as well as some challenges to get the new-crop in the ground. Throw in increased export and crush demand as a result of bean tariffs, and it’s enough to encourage a bid. Lack of selling rather than supply looks to be the issue in canola, so this market could turn fast if new-crop conditions improve.

Australia

Aussie markets in the south were supported yesterday, but were not as explosive as those in the north, where US sorghum import restrictions put a rocket under prices. Sorghum rallied over $10/t and wheat and barley were not far away. New-crop barley delivered Darling Downs was trading at over $315/t, with few offers presenting. The forecast remains dry, with the exception of some scattered showers in northern NSW and southern Queensland which could produce 5-15mm of rain. This is not enough to warrant a turnaround in price strength in these markets. We are trading hefty drought premiums in April, but it’s more a function of tight feedgrain supplies and surprising domestic consumption. We need to see a good rain in the next month, which would likely only put pressure on wheat, as it has the balance sheet to fall back on. Otherwise it’s hard to determine how high the flat price will go.

Source: Lachstock Consulting

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