|Wheat futures fell overnight in the US with Russian and French flat to softer. Heavy balance sheets temper any supportive market action and, with constant debate still around the implications of COVID on demand, it is hard for the bulls to get a good run on things. The only real glimmer of hope for these markets remains in wholesale Chinese buying which feels further away today than it did this time last week. The meeting in Hawaii indicated the deal is still on track. Aside from the market keeping a little “China, what if” premium embedded in the price, near perfect weather from a global perspective suggests no premium is needed.
COVID is still having its influence over financial market with a 3.5% fall in US equities overnight, sparked by data showing Florida and California both set a daily record for new cases. The impact of reopening many of the states that were initially hardest hit is now being felt, although, as Donald Trump points out, testing rates have also dramatically increased in these same areas. Timing is everything – as the US starts to really get into the election race, the opportunity for sound bites is not being missed by the US press. The President has repeatedly referred to COVID as the “Kung Flu” which could certainly have some impact on the tenuous Phase One trade deal.
Additionally, the IMF has sent another shock wave through financial markets by indicating it expects global output to shrink by 4.9pc vs their last guess of 3.0pc. They also tempered their 2021 growth outlook to 5.4% vs the April forecast of 5.8%. The AUD was on the receiving end of selling as the “safe haven” USD buying started to show up – this was also helped by increased tension between the EU and the US as Trump threatened to increase/impose tariffs on a range of EU produced products in retaliation for the EU considering extending closing its borders to the US.
New season Aussie wheat markets continued to hold yesterday with ASX Jan 21 east coast contract ratcheting a fraction higher to settle the day out at $285/t and barley also a tad firmer $245.50/t. Old season values remain steady with hand to mouth buyers and grain leaking into the market. Wheat track values are valued at a wide range of $320-330/t through Victoria with good execution sites attracting buyers still. The forecast remains positive for southern WA over the next 8-days on the BOM, while SA continues to get scatted showers and a dryer 8-10 days along the east coast.