Overnight markets
Much stronger for grains, mixed for oilseeds.
CBOT wheat was up 21c to 505.5c,- Kansas wheat up 22.75c to 531c,
- corn up 4.25c to 378.75c,
- Soybean up 12.5c to 1068c,
- Winnipeg Canola up 1.20$C to 525.2$C, and
- Matif canola down -3€ to 357.5€.
- The Dow Jones down -536.78 to 24492.42,
- Crude Oil down -0.5c to $US61.14 per barrel,
- AUD down to 0.774c,
- CAD up to 1.285c, (AUDCAD 0.995) and the
- EUR up to 1.223c (AUDEUR 0.632).
Wheat
Same story as yesterday for wheat, funds rushing for the door as US weather shows no nearby signs of improvement.
Export sales came in at 191,000t, which was well below the trades estimate of 300,000t.
The wheat market is not trading fundamentals at present, as the rally is more of an order flow issue from funds exiting positions and piling new money in.
Commitment of Traders data will be out tonight and should suggest a square or very limited short position in Soft Red Winter wheat. So with funds long corn, wheat and beans, and a weather market playing out, it will be difficult to determine where to from here. The supply/demand figures would suggest that prices are overcooked at current levels.
Matif wheat futures were only up €0.5/t to €168.75/t. A slightly stronger Euro did not help, though it seemed that this rally had met some grower selling, given the inability of Matif to follow CBOT higher.
Black Sea prices are a different story, where open interest has reached record highs for the CME Black Sea futures contract. This comes off the back of increased cold temperatures limiting execution capabilities, as well as new crop winterkill concerns. Russian prices are rumoured to have traded as high as US$209/t FOB (free on board).
Corn
Export sales in corn came out at 1.753 million tonnes (Mt) for the week vs. market expectations of 1.4Mt. There is talk of the Trump government allowing bio-fuel credits for ethanol exporters, which would lead to increased, margin, production and consumption of corn. Otherwise there was no major fundamental input, corn remains a laggard to bean and wheat pricing and could surprise to the upside given the positive demand profile.
Soybeans
Soybeans futures prices were stronger again with no improvement in Argy weather, a strong technical picture and active fund buying.
Export sales in beans came in better than expected at 879,000t, which was a welcome surprise considering the negative sales we saw last week as a result of cancelations.
Soymeal was up $2.5 per tonne, while oil was up 16 points.
The potential for a China/US trade dispute in beans is increasing, with the Trump government imposing import tariffs on steel (25pc) and aluminium (10pc). The markets are not trading this risk yet, either because it’s hard to trade politics, or because they think that with only three major global exporters China cannot afford to disrupt US bean supplies.
Canola
Canola continued its run up, thanks to strength in beans and oilseeds. With dryness in Canada and attractive local and offshore crush margins, it is hard to find sellers at present. This has encouraged the May contract to break out, now looking like pushing November highs of Can$530/t.
Australia
Aussie cash markets had their heads in the sand yesterday, with majority of the trade not willing to acknowledge the rally and return it in cash pricing, despite a weaker dollar.
This comes from the fact that wheat demand has been slow all year and that our export demand is pinned closely to Black Sea prices, which are not overly responsive to CBOT movements.
In any case the rally will provide great opportunities to scale into new crop sales, or to use new crop to cover old crop positions, given the attractive carry and potential for tightness in the back end of the Aussie wheat balance sheet.
Barley prices were a laggard, with the market awaiting stronger price signals from China before they step in.
Dalian corn futures in US dollars are down $1/t, sitting $3/t off their highs at $288/t.
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