Markets broke lower.
- Chicago wheat December contract down US8.5c/bu to 742.75c/bu;
- Kansas wheat December contract down 8.5c/bu to 728.25c;
- Minneapolis wheat December contract down 6.5c/bu to 904.5c;
- MATIF wheat December contract down €4.50/t to €243.75/t;
- Corn December contract was down 14.25c/bu to 550.75c;
- Soybeans November contract down 33.25c/bu to 1320c;
- Winnipeg canola November contract was down C$14 to $890.80;
- MATIF rapeseed November contract down €8.75/t to €564/t;
- US dollar index up 0.4 to 93.6;
- AUD weaker at US$0.714;
- CAD weaker at $1.282;
- EUR weaker at $1.168;
- ASX wheat September contract up A$5/t to A$355/t;
- ASX wheat January 2022 up $6/t to $350/t.
In the wheat pits Chicago settled down -8.5 usc/bu closing at 742.75usc/bu, Kansas was -8.5 usc/bu lower to settle at 728.25usc/bu, while Minni softened -6.5 usc/bu to go out at 904.5usc/bu. Corn fell -14.25 usc/bu to go out at 550.75usc/bu while Beans were down -33.25 usc/bu to settle at 1320usc/bu WCE Canola softened -14 CAD/mt closing at 890.8CAD/mt with Matif Canola finishing lower by -8.75 Eur/mt. In outside markets the Dow Jones fell -66.57 points, Crude was down -1.73 bbl the Aussie was -0.0081 points lower to settle at 0.71459, the CAD rallied 0.0178 while the EUR fell -0.0031
Commodity markets shed length
At any one point in a market you can generally find a handful of data points that will drive sentiment and ultimately market direction. At the moment it’s a hot mess. Rainfall forecast thoughout the US row crop belt this weekend is fast becoming a binary event – decent falls, market bleeds lower – rainfall amounts disappoint, the market goes back to building risk premium. Wheat however is struggling for that one driver. Production cuts have clearly been the focus so, it is logical to look at demand. With the wheat/corn price differential towards the $2/bu range it makes sense to throw some feeding back corn’s way. I’m not sure however this can make up for the extent of the cuts, particularly in North America.
Russian domestic prices are a focus. The tax system has done nothing to quell the support and food inflation is hitting the headlines. The next step will be the next big data point for the market. Do the Russians instil measures to control their local values? What does that look like for FOB access? Nothing is clear and it may be that they give their new system time to work.
The Australia dollar is showing no signs it can stop the rot and now eyes 0.7100 as its only vague support level. The data keep coming. Today the People’s Bank of China will make their interest rate decision. If all the $A had to go off was iron ore the price move would be justified. China demand and subsequent pricing has been falling since mid-July and most China price indices are now testing calendar-year lows made at the start of the year. There are more questions than answers when viewing China commodity demand as a whole. The rampant corn buying pace we saw a few short months ago has slowed to a walk. Did they over buy? Are they dealing with their own Delta issues? Is this simply the result of a crackdown on commodity speculation they flagged back in June?
With both commodity markets and the $A weakening overnight the local trade will only adjust price slightly. Export margins remain robust on paper but the logistic impacts on back-to-back trades suffered last year will be fresh in the mind of the trade. Global shipping rates are still very firm in the front end. While it is great for Australia’s competitive advantage into Asia but not helping container availability or pricing. With an extremely wet finish to the French harvest it is logical to assume Australian protein wheat will be sought after, however, given that a decent percentage of this demand has historically been serviced by the box market, crystalizing this margin may be harder than it looks.
Old crop markets remain firm on the east coast with pockets of spot demand skewing the old crop inverse.
Source: Lachstock Consulting