Markets

In what was an ugly week for US futures and Friday was more of the same. Risk premium is in the eye of the beholder. It is largely impossible to quantify how much the market is concerned about the “what ifs” but, looking at Chicago futures, it’s clear the trade sees little in the way of problems ahead that warrant protection. The spread between US futures and competing origins such as EU and Russia is extremely low which tells you all you need to know about what the US trader is thinking. Interesting that corn is grinding out a little rally. It is not off to the races but certainly we have hit a lack of selling. In part this has been supported by the rally in domestic Chinese corn and the risk that, through Phase One or not, the Chinese step in and buy a bucket load of US product. This is where things become more than a little opaque. The US and China met in Hawaii last week to discuss among other things, the Phase One trade deal. China recommitted to step up their purchasing to comply with the terms of this agreement. I’m not sure what this actually means however, given the ongoing tension between the two trading partners. Tension is certain to increase with China releasing its blueprint on its new national security law targeting Hong Kong. The details of this plan will certainly attract global criticism given China plans to override Hong Kong’s independent legal system.

If you thought commodity markets were difficult to predict, venture over to the FX pit and see how you would go. The AUD is testing the lower end of the recent range this morning, still woozy from last week’s horrible employment figures. However the USD is certainly not a pillar of strength with COVID rates on the climb and some fun and games on the election campaign trail. Trump’s first rally was marred by the confirmation that 6 of his rally staff had contracted the virus. Betting continues to swing in Joe’s favour, the Democrat leader at 1.65 vs 2.50 for a Trump win.

Australia

For the second consecutive weekend parts of SA, Victoria and Southern NSW all received a nice top up. Growers were madly applying another hit of urea to crops, capitalising on what has been a great start to the season. Southern parts of Western Australia have also recorded 10-15mm in the past week while the northern zone continues to look for the next drink post the extreme winds and subsequent re-sowing of a few weeks ago. Last week markets closed with new crop wheat values finishing down $10-12/t through the domestic feed homes. ASW1 delivered Geelong-Melbourne range finished up around the high $280s per tonne and Darling Downs SFW1 in the low $290s all for January plus delivery. Spreads remain tight through growing areas positioned to supply the domestic feed market, while the export zones such as Port Lincoln and WA all price into the Philippines and other South East Asian destinations, putting the back of envelope calculations at US $220/t FOB. However, this is purely academic until the buyers pay the number.