Daily market wire 25 August 2017

Overnight markets:

Stronger for grains, mixed for oilseeds.

CBOT wheat up 4.5c to 434.5c,
Kansas wheat up 7.5c to 433.25c,
Corn up 0.5c to 356.25c,
Soybean up 8.5c to 946.5c,
Winnipeg Canola down -2.50$C to 510.2$C,
Matif canola up 1.25€ to 372€.
The Dow Jones down -28.68 to 21783.4,
Crude Oil down -0.789c to 47.62c,
AUD down to 0.790c,
CAD down to 1.252c, (AUDCAD 0.989)
EUR down to 1.179c (AUDEUR 0.669).

Wheat

Wheat closed higher across all three classes. Spring wheat was the leader finishing 11 cents higher. Implied volatility in Dec Soft Red Winter wheat futures went out at 21.25 per cent. There was not a clear fundamental driver of the rally, feels like we ran out of sellers with most of the negative news already priced in. US weekly export sales were lower than expected. The International Grains Council increased global wheat production by 10 million tonnes (Mt) to 742Mt, this came as no surprise though in light of the USDA’s Black Sea production increases. Demand has been reasonable, Iraq bought 50,000t of US and Australian wheat, while Tunisia and Algeria have both tendered. Global wheat has a lot riding on the Russian Ruble at the moment, it continues to push against key resistance but has not managed to break it yet.

Corn

Corn had a fairly benign session trading a 2.75 cent range, finishing close to unchanged. This was somewhat surprising given that the Pro Farmer crop tour reported yields in Iowa and Illinois that were below the USDA’s estimate. If realised, this would force a decent reduction in the corn crop, given the large volume that these states produce (33pc of the national crop). So the market either doesn’t trust the crop scouts, or doesn’t care, given the stock burden already present. Export sales were below expectations, reaffirming the stiff South American competition the US faces.

Soybeans

Soybeans finished stronger, supported by better than expected export sales. US weather is not posing any threats to crop yields, although there is some talk of low pod counts which have come out of the Pro Farmer crop tour. Relative value is supporting beans and increasing export interest. As a result of this, it is hard to see a huge amount of downside given that we are only 40 cents off the lows. Nearby meal premiums are increasing relative to deferred positions, which is prompting a bullish view, for nearby seed demand.

Canola

Canola held firm early in the session, but could not sustain its gains, slipping back on a weaker veg oil markets. After pushing nearby resistance on the biofuel import story, US soy oil could not break through, which prompted a reversal leading things lower. This encouraged profit taking and physical hedging for longs that have been riding things higher. Regardless of this, early harvest reports are still fairly mixed, which provides very little clarity to the large variation in production estimates and increases the volatility which we will witness in the report from Statistics Canada next week.

Australia

Aussie weather features limited moisture on the forecast, while some minor frost risk is forecast for parts of central NSW in the next two days. Cash markets are quiet, possibly too quiet given recent weather events, which should increase risk premiums for new crop.

Source: Lachstock Consulting

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