Markets

Daily market wire 21 July 2017

Lachstock Consulting, July 21, 2017

Overnight markets:

Higher for grains and oilseeds.

  • CBOT wheat up 2.5c to 529.25c,
  • Kansas wheat up 3.5c to 530.25c,
  • Corn up 8.5c to 404.75c,
  • Soybeans up 14.25c to 1018.25c,
  • Winnipeg canola up 3$C to 514.9$C,
  • Matif canola down 0.5€ to 367€,
  • Dow Jones down 28.97 to 21611.78,
  • Crude Oil down 0.32c to $46.79c,
  • AUD up to 0.795c,
  • CAD down to 1.258c, (AUDCAD 1.001),
  • EUR up to 1.163c (AUDEUR 0.683).

Wheat

Wheat closed modestly higher across the three contracts on currency weakness and surprising export sales. Rainfall in the Dakotas had spring wheat values under pressure early, but it recovered to finish slightly higher. Rainfall now will probably not affect yields much, given the timing. It will sow seeds of doubts to longs in the market, so it will be effective nonetheless from an order-flow perspective. Soft Red Winter and Hard Red Winter basis is under pressure as farmer selling increases, though there is still a lot of work to do to spark enough export demand to impact the balance sheet. Australian and Canadian yield potential over the next month will have a significant impact on futures pricing, as these need to tighten to reduce p8 stocks and rationalise a fundamental rally.

Corn

Corn ignored surprising showers in parts of the belt to finish stronger on a hot and dry longer-term forecast. The variance in forecasts is causing a lot of challenges for traders, but price action suggests they believed this one. The funds were noted buyers, pricing in more yield risk premium, as Informa released a 166.2 bushels-per-acre yield forecast. The Dec contract managed to close over 400, which represents technical strength and may encourage the algorithms to get on board. At the end of the day, global supplies are in abundance and demand for US corn is limited. If the weather doesn’t do any further damage, suggestions are it will tail off eventually.

Soybeans

Soybeans again led things higher, with fund buying noted on the increased weather risks as we near the key production period. On the demand front, Chinese inquiry is quiet with cheaper South American alternatives, though the combined potential issues in soybeans and canola in the US and Canada could prompt some buying going forward.

Canola

Canola was stronger again, though the close was disappointing, finishing $3 off the highs in the Jan contract. The final Canadian crop production figure will not be realised for some time, but the market is in serious conflict as far as potential is concerned. Better rains forecast for the Prairies will provide some relief, though this was countered by reports of greater-than-expected hail damage. Add the limited margin for error on the back of incredibly tight old-crop supplies and we get a scared market.

Australia

It’s ground hog day for the Aussie weather forecast, with no significant changes. NSW needs some decent rainfall soon or we will see basis again move higher. New-crop barley is still trading at a domestic ration discount to wheat, while the northern drawing arc is also extending further south to soak up southern stocks. This is astounding, given that the new-crop barley ending stocks and stocks-to-use ratio will be at their lowest levels since 1984. Barley is good domestic value at these levels, as we suspect that it will trade independently of wheat early next year, when the export market realises how much it needs Australia.

Source: Lachstock Consulting

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