Mixed for grains, lower for oilseeds.
- CBOT wheat up 4.5c to 558.25c,
- Kansas wheat up 7.25c to 563.75c,
- Corn down 7.25c to 365c,
- Soybeans down 17c to 886.75c,
- Winnipeg canola down C$5.00 to $495.80,
- Matif canola up €2.25 to €379.50,
- Dow Jones down 81.36 to 25333.82,
- Crude oil down US$0.92 to $67.84 per barrel,
- AUD down to 0.739c,
- CAD down to 1.299c, (AUDCAD 0.961),
- EUR down to 1.165c (AUDEUR 0.634).
Wheat defied weakness in beans and corn to post a strong close, breaking through technical resistance and testing the May highs. Matif futures were up €5 to €208.25. Implied volatility in September Soft Red Winter wheat finished at 34.87 per cent. Further production cuts in Europe saw Matif futures reach new highs not seen since 2014. The German Ag group lowered its wheat estimate to 18 million tonnes (Mt) from 24Mt last year. The Algerian tender did not trade, with offers at $273 per tonne with buying ideas $3-5/t below. It is difficult to see this not trading at the offer given the constant increase in flat price in the Black Sea. USDA’s World Agricultural Supply and Demand Estimates report due out next has a very large rationing task to perform in light of the monthly production losses of around 15Mt that the globe has endured. It is very hard not to be bullish from here, with the global consumer largely uncovered, and the global exporters stocks-to-use ratio nearing historic lows. The only problem is that everyone but the consumer is on the same side. The Egyptian Government’s GASC results tomorrow will be a good indication of recent price movement.
Corn was caught up in bean weakness, and an improved US weather forecast that saw it return all of yesterday’s gains to close through the 50-day moving average. Yield estimates are decreasing, with the average guess now working on a 175-178 bushels per acre figure. There is no doubt that the global balance sheet in corn is tight, but it cannot get the same buying support as wheat until production is known. On top of this, there is theoretical pressure for some demand destruction from Mexico if it decides to pursue Argentinian supplies, given Mexico’s currently tense trade relationship with the US.
Soybeans gave up most of their previous day’s gains thanks to more Trump trade chatter. The US Government is now talking of raising Chinese tariffs from 10 per cent to 25pc, which comes as a shock, given the positive dialogue from the day prior as China looked to dial down the tone of trade discussions in an effort to reach mutual ground. Soymeal was down $4.70/t and soy oil dropped 27 points.
Canola was mixed, with Winnipeg a follower of the US vegoil complex as the trade trash-talk continues. Matif futures couldn’t fall if they wanted to, given ongoing production issues across most of its major production regions. New highs were reached, and should be sustained, which will bode well for Australian pricing.
Aussie markets were stronger yesterday in quiet trade, with most of the industry busy networking and learning at the annual grain conference in Melbourne. New-crop wheat reached a new high of $387/t, up $3 as the eastern states forecast continues to disappoint. The media has latched on to the Australian drought story this week, making it a front-of-mind issue for the general public. It’s hard not to get caught up in the hype, and there is potential for an overreaction, given the ambiguity in current crop estimates. Yes, we are below 20Mt, but the market is trading something well below that at less than 17Mt, and the longer it stays dry, the more realistic this becomes, with $400/t is not out of the question.
Source: Lachstock Consulting