Markets

Daily Market Wire 22 June 2018

Lachstock Consulting, June 22, 2018

Higher for grains, mixed oilseeds.

  • CBOT wheat up 7.5c to 506.75c,
  • Kansas wheat up 4.25c to 510c,
  • Corn up 2.75c to 366.5c,
  • Soybean down -9c to 885.5c,
  • Winnipeg canola up 5.60$C to 525$C,
  • Matif canola up 3.5€ to 353.25€.
  • The Dow Jones down -196.09 to 24461.7,
  • Crude Oil up 0.09c to $US65.8 per barrel,
  • AUD up to 0.737c,
  • CAD up to 1.331c, (AUDCAD 0.981)
  • EUR up to 1.160c (AUDEUR 0.635).

Wheat

Wheat increased, thanks to warming conditions in Russia’s winter wheat area and talk of production declines in China and Europe.

Agritel, a European crop forecasting agency, came out with a 67.4 million tonnes (Mt) Russian crop estimate after a recent crop tour, this is 1.1Mt below the USDA’s current forecast.

MARS, the EU crop forecasting service, called for reduction in cereal and oilseed yields.

In the US weekly export sales were a surprise coming in 461,600t, 52pc higher than last week’s figures. Hard Red Winter (HRW) wheat harvest pressure and structure continue to force its decline relative to Soft Red Winter (SRW) with July Sep futures now close to parity. There is school of thought that this is unsustainable given the potential for increased HRW export demand in the event that Australia and Russia’s hard wheat exportable surplus declines.

Implied volatility in Sep SRW went out at 27.96pc.

Reports of 20pc reductions in China’s wheat crop are the catalyst for a 5pc domestic price increase despite ongoing harvest. If this story eventuates then their imports will increase which is very supportive of CBOT and Aussie wheat.

It will be interesting to see where the weekly Commitment of Traders (COT) report comes out after tonight’s close, as wheat fundamentals are getting more and more bullish, so if a large short has been built then we could see a sharp price reaction.

Corn

Corn found some support from declining Black Sea conditions and the potential for a heat ridge moving into the US late next week.

This was despite poor export sales at 505,000t, well below market expectations and the lowest since late December.

Crop declines in Europe and the Black Sea will likely increase the US demand profile, which should support prices, provided that US yield potential doesn’t increase further from here.

Other than that, there is no major fresh input, the technical picture in corn looks oversold and could reflect decent buying given the proximity to seasonal lows.

Soybeans

Beans finished lower again, with no trade resolutions in place.

Export sales in soybeans came in below expectations at 528,000t, consisting of 301,000t old crop and 227,000t new crop.

Soymeal was down US$1.40/t, while soy oil was down 25 points.

The market is busy repositioning China’s supply requirements in the event that trade resolutions are not met. As was the case when this issue first reared its head, it appears that the US will still find export demand, but the destinations will have to perform a major reshuffle.

Canola

Canola gained traction from ongoing speculation about large demand increases stemming from global trade issues.

Front month futures gained over back end as contracts near expiration and grower liquidity remains limited.

Australia

Aussie markets were mixed yesterday, with buyers not showing the same aggression due to a mild forecast for NNSW and SQLD. It was 10-20 mm, which didn’t seem adequate to prevent crop declines there.

New crop export zones in Australia are buying new crop demand, which could work against east coast prices, given that we are at import parity and the crop continues to reduce in size.

Source: Lachstock Consulting

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