Markets

Daily Market Wire 19 May 2025

Lachstock Consulting May 19, 2025

Weather:  More of the same on the weather front – nothing in the north of the EU, and some scattered falls though Russia and Ukraine. Wires becoming more focused on Australian prospects..

Markets: Pretty insipid close to the week for US futures – the biofuel sector is getting frustrated with the lack of clarity around the credit extension. Funds getting shorter and shorter with nothing fundamentally compelling enough to bust them out.

Australian day ahead: It’s all about forecasts. Some more rain is being built into southern New South Wales, and values should be close to unchanged today.

Offshore

Wheat

Wheat markets reversed recent strength, with July contracts all posting losses as funds added to shorts across Chicago, Kansas, and Minneapolis. While demand remains present, burdensome carryout levels in HRW and decent global prospects keep the market heavy.  SRW quality risks are rising due to wet soils from Missouri through the Ohio River Valley.

France’s wheat rating dropped slightly, and western Europe faces a dry two-week outlook. In China, early harvest has begun in some regions, which may limit the damage from upcoming extreme heat, though concerns remain. Ukraine has planted 215,000ha of spring wheat so far. A Saudi tender for Aug-Oct shipment may support HRW if it captures early demand.

The broader balance sheet remains heavy, but a combination of export traction, potential weather issues in the EU, SRW, and Australia, and speculative short covering could spark a bounce.

Other grains and oilseeds 

Corn markets weakened despite solid fundamentals, with Chicago’s July and December contracts declining into the weekend, and fund shorts are significant at 85,000t. Domestic weather is ideal, and Brazilian supply is expected to increase following a USDA production lift.

China continues to probe global feedgrain markets, sourcing barley and sorghum as it struggles to plant its own corn crop.

Ukrainian planting progress includes 3.5 million hectares of corn, 743,000ha of barley, and other spring grains.

The soybean complex was mixed, with July and October flat to slightly lower, with meal under pressure and crush margins narrowing.

Biodiesel-related policy remains uncertain, with the House Budget Committee blocking a key bill that would have extended 45Z credits. The EPA is now under pressure to address 161 pending biofuel blending waivers.

Palm oil posted a weekly gain on strong export data, while Brazil reported its first HPAI outbreak on a commercial poultry farm.

In sugar and ethanol, Brazil may divert up to 1Mt of sugar production toward ethanol if sugar prices fall further.

Macro 

US consumer sentiment dropped to its second-lowest level on record, led by falling confidence in current conditions and expectations.  Inflation expectations surged, particularly among Republicans, and are at multi-year highs. This follows the recent 115ppt US-China tariff reduction for 90 days, though sentiment only modestly recovered late in the survey window. Moody’s downgraded US debt, aligning with Fitch and S&P, as fiscal concerns mount.  The administration’s budget trajectory is under scrutiny, with criticism from figures like Michael Bloomberg. The FOMC is unlikely to cut rates before Q3. Near-term data focus includes jobless claims and PMIs, with manufacturing likely in contraction and services still expanding.

Globally, China warns of heat risks for winter wheat crops.

Trade negotiations continue: the US and China reached a temporary truce, the EU is revising its trade proposals to the US, India is reviewing ethanol import restrictions, and Trump signaled upcoming tariff decisions for numerous partners.

Australia

Domestic corn values continue to push higher, trading at around A$400/t along the Murray River region. It’s all about rainfall prospects – coastal falls throughout South Australia, Victoria and New South Wales ranged from 1-5mm while northern NSW and Queensland saw falls of up to 25mm across most of the belt

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