Macro markets led lower overnight, and agricultural commodities took risk off.
- Chicago wheat July contract down US 36.75cents per bushel to 1230.75c/bu;
- Kansas wheat July contract down 43.25c/bu to 1324.5c/bu;
- Minneapolis wheat July down 40.75c/bu to 1352.75c/bu;
- MATIF wheat September contract down €7.75/t to €430.50/t;
- Black Sea wheat July contract up $1/t to $417/t;
- Corn July contract down 19.25c/bu to 781.5c/bu;
- Soybeans July contract down 15.25c/bu to 1662.75c/bu;
- Winnipeg canola November 2022 contract down C$26/t to $1069.10/t;
- MATIF rapeseed November 2022 contract down €41.50/t to €819.75/t;
- AUD dollar weakened to US$0.697.
There were severe downward moves overnight resulting from macro markets copping a proper shellacking and commodities participants taking risk off. The Dow Jones Industrials Average had its biggest down day in two years, closing 3 ½ pc lower, the S&P 500 4pc and the NASDAQ almost 5pc. Yesterday one US retailer, Target Corporation, saw its share price drop 20pc, the worst session for that company since 1987.
UK inflation, now 9pc in the 12 months to April, has its fastest surge in 40 years as the cost of living crisis bites. US Federal Reserve president, Jerome Powell, anticipated the FED will continue to raise interest rates until there is “clear and convincing” evidence that inflation, which is currently at 40-year records in that country, begins to fall in a sustained manner. “We have to get inflation to 2 percent. We have to restore our price stability. It will be challenging to do that and we have to slow growth to do it,” he said. His statement had a negative impact on the markets.
Politics is becoming more influential and less predictable in the current environment as Indonesia bans palm oil export, rumours emerge of Germany cutting mandates, India vacillating on wheat exports and the UN trying to facilitate talks with Russia, Ukraine, Turkey, the EU and US on restoring grain exports out of Ukraine.
Food inflation and the political risk that comes with it is front and centre today
In Canada, canola planting progress and conditions are a mixed bag. Western and southern areas are okay, but many areas still are too dry. The east and north has been too wet. This will likely lead to farmers switching out of canola as it gets too late given the high cost of production this year which would mean the planted area will trend closer towards StatsCan’s number (of -7% YoY). We are still higher than them at -3%. Crop of 19.86 million tonnes.
Shanghai health officials said on Tuesday that the city had brought the COVID-19 outbreak under control, after a nearly two-month lock down that disrupted residents’ access to food and medicine, stoked widespread public outrage and brought China’s financial centre to a standstill. China’s economy slowed sharply in April as Beijing’s ultra-strict “zero COVID” strategy dragged consumption and industrial production to their lowest levels since early 2020..
Markets firmed again yesterday and the liquidity continued to flow through the depot sites. H2 wheat hit $570/t track Port Lincoln while on the east coast H2 traded at $534/t track Portland on Clear Grain Exchange. Delivered markets remain one sided with little bits and pieces trading as growers come to the back end of seeding programs and are looking to move some stock for June onward.
According to BOM the La Niña persists. While latest model outlooks show the majority of models return to neutral-ENSO by July, all models remain cooler than average in the central tropical Pacific over the southern winter, ranging from cool-neutral conditions to weak La Niña conditions. These patterns would be likely to favour above average winter rainfall for eastern Australia. Model accuracy at this time of year is moderate. The Indian Ocean Dipole (IOD) is neutral. Latest model outlooks indicate a negative IOD event may develop during early to mid-winter. A negative IOD event can enhance winter and spring rainfall across much of Australia.
The short-term outlook is for a relatively dry couple of days throughout the entire winter cropping belt with showers developing over southern Queensland and north western NSW on Saturday afternoon and spreading across NSW on Sunday and Monday but totals are forecast to be less than 10mm for most. Showers are forecast to continue into next week which will not help dry out the very wet areas through central and northern NSW and southern Qld. The forecast for next week for southern WA will be perfectly timed with at least 10-25mm expected.