Markets

Daily Market Wire 21 June 2018

Lachstock Consulting, June 21, 2018

Higher for grains and oilseeds.

  • CBOT wheat up 10.5c to 488.25c,
  • Kansas wheat up 5.75c to 488.75c,
  • corn up 0.5c to 354.25c,
  • soybeans up 0.5c to 889.5c,
  • Winnipeg canola up 1.100$C to 519.4$C,
  • Matif canola up 2.25€ to 349.75€.
  • The Dow Jones down -42.40 to 24657.8,
  • Crude Oil up 1.150c to $US66.22 per barrel,
  • AUD down to 0.736c,
  • CAD up to 1.331c, (AUDCAD 0.980)
  • EUR down to 1.158c (AUDEUR 0.636).

Wheat

Wheat bounced back to close through the 200-day moving average, as traders favoured long positions given the recent downside movement and the likelihood of a tightening global balance sheet.

Implied volatility in Sep Soft Red Winter (SRW) wheat futures went out at 27.72 per cent (pc).

The major surprise from the recent sell off has been that the calendar spreads have remained firm. This suggests that grower liquidity is not the driver and fund sellers are trying to bully the market lower.

If the Commitment of Traders report (COT) Friday were to reveal a large increase in the short position, then wheat would be in a good position to rally.

Harvest delays are occurring in Kansas as wet weather prevents paddock access, however there are no major concerns for quality impacts just yet. HRW has endured a strong sell off recently and could be in a position to take out some export demand, if Australian and Russian production fall below current estimates.

Export sales out tomorrow are expected at 375,000t.

While the jury is out on Russian wheat production, upcoming weather is not looking to have any positive production impact, with hot dry conditions expected over the dryer parts of the winter wheat areas.

Given the world’s reliance on Russian production this year, it feels like time the market started paying closer attention given that we are at seasonal lows and the major 8 exporters are forecast to have the tightest stocks/use since 2007/08.

If we can get politics out of the way, then wheat should have a run.

Corn

Corn finished with mild gains, trading with similar price action to beans. US yield ideas are gradually increasing thanks to favourable starting moisture, but pollination weather in July will be the key to determining the corn crop.

With a tightening global balance sheet and a heavy reliance on US yields, we expect to see some risk premium build into the corn price.

Weekly ethanol production came in at 1.064 million barrels per day, which is the highest weekly production since February.

Export sales out tomorrow, with the market looking for 850,000t of old crop and 275,000t of new crop.

Soybeans

Soybeans stabilised overnight, in a quieter session with an average trading range.

US weather remains favourable for corn and soybean production.

Other than that, there was no major new input, the market remaining at the mercy of trade negotiations.

Soymeal was down US$1.50/t, while soy oil was up 51 points.

Canola

Canola followed a turnaround in vegoil prices and soybeans to finish firmer.

New crop contracts outperformed old crop prices with speculation that rape oil price declines in China will reduce near term demand.

Australia

Aussie markets remain well supported thanks to not only a dry 8-day forecast, but also an increasing potential of El Nino and a lower AUD.

The east coast market is doing the price work to encourage interstate imports, but the risk is that our export states remain competitive into Asian destinations on barley and wheat relative to our Black Sea competitors.

If flat price in Russia/Black Sea increases, then SA/WA exports will increase, meaning east coast will have to rally to buy imports.

Source: Lachstock Consulting

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