Markets

Daily Market Wire 23 March 2020

Lachstock Consulting, March 23, 2020

Wheat and beans firmed, corn and canola weakened.

  • Chicago wheat May contract up US4.25¢/bu to 539.25¢;
  • Kansas wheat May contract up 3.5c to 469¢;
  • Minneapolis wheat May contract up 1.25c to 521¢;
  • MATIF wheat May contract up €2/t to €191.25/t;
  • Corn May contract down 1.75c/bu to 343.75¢;
  • Soybeans May contract up 19.25¢/bu to 862.5¢;
  • Winnipeg canola May contract down C$1/t to $461.90/t;
  • MATIF rapeseed May contract down €1 to €349/t;
  • Brent crude May contract down US$1.49 per barrel to $26.98;
  • Dow Jones index down 913 points to 19174;
  • AUD weaker at $0.5772:
  • CAD firmer at $1.4429;
  • EUR firmer at $1.0734

Market news

Chicago ended up 4 1/4¢ to 539 1/4¢, KC +3.5¢ to 469¢, Minny +1 1/4¢ to 521¢, and Matif ended up 2€ to 191.25€.  Corn was up earlier in the session Friday but ended up down later to close -1 3/4¢ to 343 3/4¢ while beans continued to firm +19 1/4¢ to 862.5¢ (Matif and Winnipeg both off one to 349€ and $461.9 respectively).

Crude oil futures set new lows and the DOW settled down 913 points to end yet another disastrous week.

Earnings concerns are becoming more widespread as markets watch the expansion of economic restrictions aimed at fighting coronavirus.

COVID-19 commentary

There’s been a general escalation in the coronavirus worries, quarantines, and restrictions over Friday and through the weekend – WA and SA both closing their borders, VIC and NSW going into lockdown restrictions on gatherings, to say nothing of the global side.  Sentiment and uncertainty remain in the driver’s seat globally with no confidence at all that the “worst” is past.  Havoc is becoming a commonly used term.  Indeed it’s slightly humorous to look at the endless list of companies reaching out via email to placate worries that they might not be aware of the virus.  At this point it’s becoming a problem in our email inboxes…  after nearly three months of global concern on this, we’d argue that anyone not underwater on a nuclear submarine should be aware of the situation.

In ags we often say that the market thrives on uncertainty – and that volatility can bring the best opportunities.  On a macro level though, the world is so far into the nervous stage (and further lockdowns may save lives, but they also increase the economic damage) that it remains a risk of environment.  Is the world heading into a recession from the combined impact of the virus and quarantines?  Just how big will the downturn be?  Eventually we’ll be able to look back and say just exactly when the “buy” point was globally, but right now the world’s still looking for a turning point (to the better) before putting significant risk back on.

Market news

Agricultural commodities started to see some support through Friday. CBOT strengthened on confirmation of sales to China. Other physical enquiry has emerged, said to cover panic buying on the consumptive end.  Beef and wheat markets in particular have been reporting some very firm anecdotal demand as the world scrambles for food.

US sales flashed confirmed 756,000t of corn and 340,000t of HRW (new season) sold to China, and two boats of beans to unknown; there’s some speculation this is also Chinese demand.  There has been talk circulating about more potentially to come this week, business done, but yet to be flashed on both corn and wheat.

Logistics are continued to slow down in South America, with potential port strikes in Argentina and lockdowns in Brazil.  The flow has not shut off, but with roads barricading and cities locking down there have been definite slowdowns.  The trade is cautious about how much worse it could potentially get.

Similar problems are increasing in Europe too, with trucks tight on internal movements and freight costs pushing up.

On the demand side, Algeria’s back in the market again for wheat. It will be interesting to see what values they get with the coronavirus risk premium.  Saudi Arabia’s barley tender result should become known later today.

Note: USDA’s March Stocks and Planting Intentions reports will be released next Tuesday night, March 31.  They may be delayed by office shutdown.  Await news.

Australia

With the rapid border closures and lock downs coming into place in Australia, local markets are on edge for non ag-related reasons.  So far though it appears that grain transport is allowed as an essential activity. It’s business as usual for movements there.  Weather maps have also filled in more for this week across central and northern NSW, with 20-30 mm on the last runs for much of the area.  There has been some improvement on the maps for the northern edge of the South Australia’s Eyre Peninsula too, but still not that much further into eastern SA where we’re becoming increasingly concerned about moisture heading into planting.

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