Soybeans and corn continued firmer. Wheat and canola were mixed.
- Chicago wheat September contract up US7 cents per bushel to 498.75c;
- Kansas wheat September contract up 3c to 442.75c;
- Minneapolis wheat September contract down 2.75c to 517.5;
- Corn September contract up 9c to 350.5;
- Soybeans September contract up 14.25c to 891.25;
- Winnipeg canola November contract steady at C$476 per tonne;
- MATIF wheat September contract up €1/t to €181.50;
- MATIF rapeseed August contract down €0.75/t to €377.25;
- Brent crude September contract up US$0.76 per barrel to $42.03;
- Dow Jones index down 78 points to 25,735;
- AUD firmer at $0.6918;
- CAD weaker at $1.3594;
- EUR firmer at $1.1260.
We can’t underestimate the change in the market delivered by the USDA taking 1 billion bushels (Bbu), or 25.4 million tonnes (Mt), out of the balance sheet, in spite of the onerous starting point. A 2.6Bbu corn carryout is still exceptionally comfortable, but is still to be made. Remember, there are still some acres to come off the estimate with some country simply not planted and then the US farmer needs plenty of help from mother nature to reach the slated trend yields. The consumer will play its part as well – it has had little to no incentive to buy anything apart from satisfying spot demand so, with this balance sheet shift, are they forced back to the table? There is always a flipside in the grains market; demand assumptions that applied in a balance sheet with a more than 3Bbu carryout must also be revisited. Historically, feed and residual is a function of production, and ethanol demand is less than clear with COVID still throwing punches at energy demand. Regardless of the outcome, the change made by the USDA has moved sentiment from sell to “let’s just think about this for a second”. We are now in the heart of the weather market, highlighted by a short session tonight ahead of the 4 July long weekend.
Global wheat balances are heavy, but wires are now starting to publish stories vaguely painting the other side of the argument. Interestingly, both Black Sea and Australian free-on-board futures firmed. Focus has increased on hotter temperatures in Russia, Ukraine and Kazakhstan, and the potential for impact on both late winter and spring wheat areas. The UK is set to have its lowest wheat crop this century, and has suffered from a very dry spring. The USDA Foreign Agricultural Service lowered the Ukraine 2020-21 wheat production to 24.7Mt from 29.1Mt. These stories are not enough to change the balance sheet from comfortable to bullish, but they do represent the subtle shift in sentiment.
Aussie cash markets were a touch firmer yesterday on new-crop, with wheat up $2-3/t on the bid side, while offers also firmed slightly. Old-crop barley through Victoria and South Australia firmed with both feed and malting finding a bid, and trading on Clear Grain Exchange yesterday for some volume. Activity on ASX contracts has been on the quiet side, with wide bid-offer spreads on the January contracts for wheat and barley with both commodities settling the day at $290.80/t and $233.50/t respectively. Parts of South Australia cropping areas received some patchy rain overnight, with falls of up to 15 millimetres through the south-east, and some northern areas picking up 5mm. We are due to see more rain push through Victoria today and into the weekend.
Source: Lachstock Consulting
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