Markets

Daily Market Wire 23 July 2018

Lachstock Consulting, July 23, 2018

Higher for grains and mixed for oilseeds

  • Chicago wheat up 11.75c to 516c,
  • Kansas wheat up 12c to 508.5c,
  • corn up 4c to 355.25c,
  • soybeans up 3.75c to 849.75c,
  • Winnipeg canola down -3$C to 490.3$C, and
  • Matif canola down -0.5€ to 360€.
  • The Dow Jones down -6.65 to 25057.85,
  • Crude Oil up 1c to $US70.46 per barrel,
  • AUD up to 0.742c,
  • CAD down to 1.312c, (AUDCAD 0.974) and the
  • EUR up to 1.172c (AUDEUR 0.633).

Soybeans

Soybeans finished fractions higher, with early rallying attempts stifled by more tough trade talk by the US government.

Trump announced that he was going to impose import taxes on all Chinese imports which would be around $550 billion worth.

Meanwhile China and Russia’s relationships seems to be improving with the Chinese government looking to expand the regions of Russia that they allow imported ag products from, as well as expanding the product line.

If this extends into soybeans, corn and wheat, then we should see a dynamic shift in the global S&D.

Soymeal was down $1.90/t while soy oil was up 39 points.

The weekly Commitment of Traders Report (COT) had beans -84,000 contracts from -72,400 contracts.

Canola

Canola was lower in Winnipeg feeling the effects of a stronger local currency which rallied 0.94%. Canola remains very exposed to soybeans and the influence of global trade tensions. We need to see a significant tightening of the global balance sheet before it can detach and move independently.

Corn

Corn was stronger finishing near its highs in a convincing technical session for its fifth consecutive higher close.

Support was gained by production declines in Europe and the Black Sea, as well as a market consensus that upside US yield potential has stabilised (i.e. not going higher for now) at around 177 bu/acre.

This mustn’t have been picked up by fund sellers this week with the Commitment of Traders report  revealing a large weekly increase from -73,300 to -134,500 contract shorts.

Wheat

Wheat finished higher for the second day in a row, breaking short term technical resistance thanks to a host of global issues.

In the US spring wheat futures led the charge Friday thanks to global quality downgrades and flat price increases.

Implied volatility in Sep Soft Red Winter wheat finished at 29.25pc.

In crop rainfall is said to have damaged crops in parts of Europe and the Black Sea which is forcing a widening to quality spreads there.

European crops made new 3-year highs with Matif futures up €3.25/t to €191.5/t as the market continued to digest production declines in Germany and France.

Russian fob premiums were also a few dollars stronger for 12.5pc protein, with August Black Sea futures trading at US$217/t FOB (free on board).

The host of issues that have been mentioned over the last 6 weeks in wheat are finally coming to fruition and now that the price is responding, we expect that consumers will have to step in to mitigate further upside risks.

Australia

Whether you believe it or not, the Aussie market is now trading a drought in new crop with wheat prices rallying A$14/t for the week, while barley prices moved an astonishing $23/t.

The lack of July rainfall in NSW and SA has raised serious concerns for crop potential, which has combined with some talk of grower washouts in these regions to prompt short covering by traders and consumers.

This is going to feed on itself as the higher flat price increases the more consumers panic and the higher we will go.

Unless of course we see some beneficial rainfall, which adds liquidity to the market in the form of grower selling.

This is on the East Coast, on the West Coast we have cheaper prices and stable production, but given the state of the world balance sheet, we need to be careful not to price too cheap for long as the east coast consumer will be bidding against the SEA consumer if things continue to deteriorate.

Source: Lachstock Consulting

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