Friday saw another strong finish for grains and oilseeds.
- CBOT Wheat was up 11.5c to 465.25c
- Kansas wheat up 8.25c to 473.5c
- corn up 4.5c to 384c
- soybeans up 4.25c to 939c
- Winnipeg canola up 1.10$C to 514.1$C
- Matif canola up 2€ to 362.75€.
- Dow Jones up 24.37 to 21384.28
- Crude Oil up 0.22c to 44.68c
- AUD up to 0.761c
- CAD up to 1.321c (AUDCAD 1.006)
- EUR up to 1.120c (AUDEUR 0.680)
Soybeans posted slight gains in a tentative trading session, closing right on key technical resistance levels. The same old story continues to create concerns, large unsold crops in South America and the anticipation of a reduction in Chinese demand, once existing shipments reach China. One positive is the record short sitting in beans, which may need to move in a hurry if beans get caught up in the euphoria of grain markets. The expectation that the EPA will increase the biofuel mandate is supporting bean oil stronger, which is also helping seed prices.
Canola closed moderately higher, supported by a stronger oilseed complex. A stronger Canadian dollar restricted this. The old crop inverse is still there with some shorts still requiring cover, though the majority of the market looks to now be focused on new crop.
Fund buying and support from wheat kept corn on the attack. The demand story between the US and Mexico has developed with USDA announcing 120kmt sale to unknown, which is contrary to the tough talk going on between governments, since Trump came into power. The EPA talk swirling on soybeans is not expected to directly impact corn from an ethanol production perspective. The US farmer has been an active seller on the recent run up and has not managed to pressure things too much in the last week. Short covering in corn has been massive with the COT in at -65.2 vs. -171.4 k contracts. If fundamental sentiment shifts to a more bearish outlook, expect to see corn fall fast, with limited structural support. Wheat caught a bid from an attractive technical picture and ongoing global production concerns. Implied vol in July went out at 28.75%, which is impressive considering there is only a week left until expiry. Matif futures were a leader today as European crop concerns build, encouraging consumer buying. The forecast for Europe remains hot and dry in the near term and has been for some time. The COT had the wheat short at -122.4 vs. -139.74 the week before. The story in wheat is building with weather concerns in the black sea, Europe, Australia and Canada.
The Aussie weather forecast has improved slightly for WA and SA, but the amount looks limited and it’s not in the right places. Cash markets should maintain strength in wheat and barley despite a stronger dollar. We need to see an improvement in the forecast in WA, SA and NNSW, before we see any softening in cash prices, new or old crop.
Source: Lachstock Consulting