Mixed for grains, higher for oilseeds.
- CBOT Wheat was down -3c to 449.5c,
- Kansas wheat up 0.75c to 450.25c,
- corn up 3.25c to 353.5c,
- Soybean up 13.5c to 994.5c,
- Winnipeg Canola up 2.39$C to 501.5$C,
- Matif canola up 1.75€ to 368.75€.
- The Dow Jones down -9.639 to 22349.59,
- Crude Oil up 10.9c to US$50.66,
- AUD down to 0.794c,
- CAD up to 1.233c, (AUDCAD 0.980)
- EUR down to 1.189c (AUDEUR 0.668).
Beans showed strength, creating new highs not seen since the beginning of August. A new sale of 190,000t was announced to Mexico, which combines with the recent Chinese imports to paint a very positive demand story. If the market adds the perceived threat of South American production, with dryness in Brazil and flooding in Argentina then there is enough there to keep the beans well bid. Weekly commitment of traders report (COT) had the bean position -43.9k vs. -49.9k contracts last week.
Corn rallied on a combination of yield concerns and technical strength. It looks to be pushing towards 360 in the Dec contract. South American production concerns are helping to discourage selling. As well as the USDA’s small grains report, which is out this week and will provide more clarification of yields, which are still deemed by the market to be quite variable. Corn COT came in at -145.7 vs. -140.2k contracts last week.
The Soft Red Winter wheat futures price could not sustain itself over technical resistance at 450 and settled lower. Implied volatility went out at 19.25 per cent. The market was poised to break out, having managed a close above the 450 level, combined with increasing prices in Russia, a weaker USDA, not to mention the heat wave that was forecast for Australia’s east coast. But it ran out of steam and the slowed momentum prompted uncertainty/selling. The world SnD is large enough this year, to limited any sustained rallies and the narrow ranges we’ve witnessed in the last 8 sessions are a testament to this. The market seems to have forgotten the increased production potential of Canada since the satellite report last week, which may add some pressure if sentiment shifts. It’s hard to make an argument either side for wheat at the moment. We are not forging new lows any time soon, but rallies will be capped by order flow. New crop planting intentions could be the next significant catalyst.
The Aussie forecast features 10-15mm for parts of Southern NSW and Southern QLD. Over the weekend WA received 15-25 mm across most of its cropping regions. NSW temperatures soared over the weekend with the majority of cropping regions receiving temps between 35-42 degrees. The concern here is that limited rainfall and frosts have depleted soil moisture reserves too much, so the hot temps will see things fall over. We are yet to quantify the impacts of this, but for the moment, at a national level, we think WA gains from the weekends rains, may offset NSW losses. Cash markets are reacting accordingly to the production uncertainty with basis at very high levels.
Source: Lachstock Consulting