Overnight markets:

Lower for grains, higher for oilseeds.

•  CBOT wheat down -8c to 429c,
• Kansas wheat down -8.75c to 427c,
• Corn down -3c to 360c,
• Soybean up 1.25c to 937.5c,
• Winnipeg Canola up 2.30$C to 511.7$C,
• Matif canola up 3.25€ to 368.75€.
• The Dow Jones up 196.13 to 21899.89,
• Crude Oil up 0.27c to 47.64c,
• AUD down to 0.791c,
• CAD up to 1.256c, (AUDCAD 0.993)
• EUR down to 1.176c (AUDEUR 0.672).

Wheat

Wheat lower across all three classes with Minneapolis leading things lower again, down US 14 cents/bushel. Soft Red Winter (SRW), Hard Red Winter and European milling wheat futures all printed fresh contract lows, which is a technical disaster and should encourage trend followers to sell. Implied volatility in Dec SRW went out at 21.5 per cent. Fundamentals are not encouraging with Russian prices continuing to pressure the market. Consensus on Russia is that export capacity will be maxed out at 31.5 million tonnes (Mt), which makes any production increases more of a new crop issue. On Russian production, estimates continue to increase, with forecasts now ranging from 81-88Mt. The volume on the offer side of the market is too heavy to let the good demand we have seen (Algeria and Saudi) counteract things. The scenario, which turns wheat prices around, is a very oversold fund position, combined with a slow down in EU, Black Sea harvest selling. Feels like we need to endure some pain before this occurs.

Corn

Corn continued its grind lower with weather, tour estimates and fund selling the main drivers. The Farm journal crop tour called Ohio yields 164.62 bushels/acre, which is 2.4pc higher than the 3-year average for that leg of the tour. On top of this, improved rainfall over the corn belt is increasing the likelihood of the USDA’s yield estimate. The growers have turned off the tap with the lower flat price, but demand is not strong enough to encourage any active buying. Dec corn is sitting dangerously close to the US 358.4c/bu low formed at the end of August last year. A close through here will prompt further technical selling and a turn around would need to be prompted when the fund position becomes too short.

Soybeans

Soybeans managed to stay in the green despite a stronger USD and weakness in grain markets. Short covering supported prices early, prompted by ongoing demand and strength in oil. Speculation is mounting that the US government will tax Argentinian and Indonesian biodiesel imports, which will reduce US oil supplies and increase domestic crush. The new crop Brazilian crop is forecast to be down 4.4pc to 109Mt. From a US yield perspective the weather is not doing a lot to discredit the USDA’s recent estimate, which makes Chinese demand a welcome, supportive distraction.

Canola

Canola closed higher, supported by strength in veg oil markets. Statistics Canada is out next week with production estimates, which has prompted some repositioning on expectations of a lower than expected result. Technical strength is evident in the Nov chart, which is helping feeding bulls.

Australia

The Aussie forecast features no significant rainfall in the next 8 days. There has been a lot of talk about the weekend’s frost events in NSW, where the damage is thought to have been limited given the early growth stage of the plants there. Regardless of the frost, moisture is becoming a serious issue in southern Qld and central to northern NSW. This is impacting cash markets by rallying the Downs market relative to southern values, increasing the drawing arc. Otherwise cash markets are fairly quiet due to the negative global sentiments at play.

Source: Lachstock Consulting