Markets

Daily market wire 21 August 2017

Lachstock Consulting, August 21, 2017

Overnight markets:

Mild gains for grains, mixed gains for oilseeds.

  •  CBOT wheat up 1.75c to 442.5c,
  • Kansas wheat  up 0.25c to 442.25c,
  • Corn up 1.5c to 365.75c,
  • Soybean up 4.75c to 937.75c,
  • Winnipeg canola up 6.69$C to 511.2$C,
  • Matif canola down 0.25€ to 367.5€.
  • The Dow Jones down -76.22 to 21674.51,
  • Crude Oil up 1.63c to 48.73c,
  • AUD up to 0.792c,
  • CAD down to 1.257c (AUDCAD 0.996)
  • EUR up to 1.176c (AUDEUR 0.674).

Wheat

Wheat stemmed the bleeding with minor gains in winter wheats and a minor loss for spring. Implied volatility in Dec Soft Red Winter (SRW) wheat was 22 per cent (pc). The technical picture looks horrible for wheat with new yearly lows formed last week. In Europe the Matif contract continues to drift lower as harvest volumes there and in the Black Sea add weight to the offer side of things. There is a lot of speculation with regards to the execution capacity in Russia this year and the influence that will have on the export market. Wheat is getting to a point where the bad news is mostly priced in and risk premiums for Australian and Canadian production have been forgotten. The weekly Commitment of Traders (COT) report had SRW -74.6k vs. -61.7k contracts, Hard Red Winter wheat  +40.1k vs. +56.6k contracts and spring wheat +4.9k vs. +6.2k contracts. Good to see funds net short wheat again and it will be interesting to see how short they get before we turn around on fundamental concerns.

Corn

Corn slightly higher, as it searches for something to give it direction. The technical picture looks nasty. Though it might be a tough sell down here, with grower engagement non-existent. The fundamentals remain heavy, with the only potentially bullish catalyst being a large yield surprise in the Sept USDA report. The Pro Farmer crop tour commences this week, which will shed some light on yields and provide some direction. The COT came in -34.7k vs. +1.5k last week.

Soybeans

Soybeans managed a slightly higher close on a dry forecast and ongoing Chinese enquiry. The lows formed last week, have been respected and suggest nearby support going forwards. Demand is the driver of beans at present and the market is comforted by the cheap relative USD price of beans. The Commitment of Traders report (COT) had the bean position -47k vs. -27.1k contracts last week.

Canola

Canola was the leader Friday, with traders building more risk premium into the global crop. The range and uncertainty in Canadian Prairie estimates has been well documented, however the market is now pricing further production concerns for Australia and adverse harvest weather conditions in Germany leading to lower yields and oil. From a technical perspective, the Nov Winnipeg chart looks like its getting ready to test recent highs.

Australia

The Aussie weather forecast is fairly mild this week, with some scattered showers forecast for Victoria. Last week’s rainfall saw 25-50 mm for South West WA, Victoria and the majority of SA growing regions. NSW and QLD are an ongoing concern with limited rainfall, increasing temperatures and overnight frost risks. Cash markets have done a lot of work to the downside, but look to have found flat price support at these levels. Probably time to start pricing in some new crop production concerns again.

Source: Lachstock Consulting

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