Markets

Daily Market Wire 2 June 2020

Lachstock Consulting, June 2, 2020

Futures, mostly, were lower. US dollar weakened and $A firmed.

  • Chicago wheat July contract down US5.5c/bu to 515.25;
  • Kansas wheat July contract down 8c to 462.5c;
  • Minneapolis wheat July contract down 3.75c to 521.25c;
  • MATIF wheat September contract down €1.75 to €186.50/t;
  • Corn July contract down 2.5c/bu to 323.25¢;
  • Soybeans July contract down 0.25¢/bu to 840.5¢;
  • Winnipeg canola July contract down $C4 to $457.10/t;
  • MATIF rapeseed August contract up €1.25/t to €371/t;
  • Brent crude August contract up US$0.48 per barrel to $38.32;
  • Dow Jones index up 92 to 25475;
  • AUD firmer at $0.6800;
  • CAD firmer at $1.3573;
  • EUR firmer at $1.1134.

Markets

In the wheat pits Chicago settled down -5.5 usc/bu closing at 515.25usc/bu, Kansas was -8 usc/bu lower to settle at 462.5usc/bu, while Minni softened -3.75 usc/bu to go out at 521.25usc/bu. Corn fell -2.5 usc/bu to go out at 323.25usc/bu while Beans were down -0.25 usc/bu to settle at 840.5usc/bu WCE Canola softened -4 CAD/mt closing at 457.1CAD/mt with Matif rapeseed finishing higher by 1.25 Eur/mt. In outside markets the Dow Jones fell -17.53 points, Crude was down -0.05 bbl the Aussie was 0.0132 points higher to settle at 0.67975, the CAD softened -0.0199 while the EUR gained 0.003.

Wheat futures were lower overnight, pressured by improving conditions in the Black Sea region and Europe. The Egyptian buying agency GASC has tendered in what has been a very low volume buying period in 2020. GASC is looking for a mid-July shipment which, based on our best estimates should still be filled by Russian but it will be interesting where French and Romanian wheats price on a relative value.

USDA crop condition reports were released after the close of futures trade last night.  The US wheat crop was rated 51pc good-to-excellent vs last year at 64pc and an average of 58pc. It will be interesting to see what the market does with this information given national harvest was quoted at 3pc complete and Texas is pegged at 32pc done.

Looking back, one of the key elements to President Trump’s initial push-back on China was agriculture. The escalation in tariffs back and forwards were impactful on soybean exports which have essentially flat lined for the last 5 months. The latest report that China has instructed its state-owned firms to halt purchases of US soybeans and pork is reportedly in response to the US initiating a reclassification of Hong Kong independence. At the same time, it seems odd that at least 3 cargoes of US soybeans were traded to state-owned firms making the report of the Chinese directive unclear at best. An additional complicating factor of the report is that the restriction was levelled at state-owned firms, but leaves the privates to purchase what they want from where they want. Pork trade is even more difficult to understand and has been a constant source of conflicting data. The rebound in hog numbers in China post the ASF is a source of debate. Pork imports suggest that the numbers are not increasing quickly enough while implied soybean off-take coupled with a rally in domestic corn values indicate solid feed demand. Regardless, it seems difficult to massively alter the pork import pace as it indicates robust demand.

The Aussie dollar found several reasons to maintain the friendly bias. China manufacturing data were above expectation and clearly indicate a return to normal. This in turn supported onshore iron ore pricing which supported the Australian dollar. This amid the continued escalation of the protests in America, reported to have impacted 120 cities. President Trump today took the heavy hand approach to roll in the military, an action that has at this stage done nothing to stem the slide of the US dollar. The Dow Jones index finished essentially unchanged on the day. Locally, the Aussie dollar will digest net exports figures today which will allow the market to determine the GDP landscape and clearly see if we are heading towards a recession.

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Australia

Australian markets kicked off the week softer on the bid side which eventually pressured cash offers back $1-2/t on new crop in both wheat and barley. ASX Jan-21 settled lower, wheat down $3.50/t at $302.50/t and barley down $2.50/t at $241.00/t. We also continue to see strong demand for barley stored in the system in Victoria, buyers placing a relatively high value on liquidity as on-farm stocks only show very small parcels for sale. Canola markets were also down yesterday $3-4/t with most markets feeling the heat of a stronger AUD/USD. Showers of rain continue to push through the southern parts of Australia cropping regions for the week while we see a dryer 8-day outlook through northern NSW and Qld.

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