Markets

Daily market wire 26 April 2018

Lachstock Consulting, April 26, 2018

Overnight futures markets

Higher for grains, mixed for oilseeds.

  • CBOT wheat up 13.75c to 486.25c,
  • Kansas wheat up 14.5c to 507c,
  • Corn up 5.75c to 395.75c,
  • soybeans up 5.25c to 1027.5c,
  • Winnipeg canola down -1.60$C to 537.9$C,
  • Matif canola up 1.5€ to 340.5€.
  • The Dow Jones up 59.70 to 24083.83,
  • Crude Oil up 0.329c to $US68.03 per barrel,
  • AUD down to 0.756c,
  • CAD up to 1.284c, (AUDCAD 0.971)
  • EUR down to 1.217c (AUDEUR 0.621).

The reports below cover both the Tuesday and Wednesday US and European trading days, owing to Australia’s Anzac Day national holiday yesterday.

Wheat

On Tuesday night wheat futures sold off early, attempting to break the lower end of the range, before sellers became exhausted, which prompted short covering.

Some mild rainfall in Kansas encouraged sellers early, but anecdotal talk of frost damage offset this, once the day’s lows were cemented.

Implied volatility in July Soft Red Winter (SRW) wheat futures went out at 23.6pc.

Macros saw significant risk-off behaviour with the Dow falling, while bond yields reached highs not seen since Jan 2014. The weakness in equities may have also prompted some short covering in wheat today.

Hard Red Winter (HRW) wheat crop forecasts have gone from being 600 million bushels (milbu), to most estimates now sitting between 575 and 590 milbu.

Russian cash prices were off slightly at US$214/t free on board in old crop.  New crop is trading $16/t below this.

On Wednesday the market ignored positive HRW weather that showed heavier falls in Kansas and Oklahoma. Instead, the focus was on next week’s Wheat Quality Council tour of Kansas, anecdotal talk of frost damage to the HRW crop and some uncertainty now surrounding Russia’s new crop production potential due to cold weather.

Implied volatility in July SRW went out at 24.61pc.

Export sales are out tomorrow in wheat and the market has very low expectations at 50,000t for old crop and 250,000t for new.

It’s now a battle between chart momentum and an improved forecast in the US, plus limited US demand.

 

Corn

Corn finished on its highs on Tuesday night, after some softness early in the session.

Planting progress came in below the market’s expectations and this, in combination with frozen soil and strength in wheat, provided price support.

Brazil’s second crop (safrinha) is under moisture stress, which is making the 89-90Mt local crop forecasts reasonably optimistic (USDA at 92Mt).

US sorghum importers asked the Chinese government to remove their newly imposed fees, while some of the distressed sorghum cargoes have been rehoused in Saudi Arabia and Japan.

On Wednesday we saw an impressive rally, as trade-war tension concerns eased, and the market focused on the ongoing dryness in Brazil.

In the US, planting weather looks to be improving in the northern plains which should open up a window enabling growers to catch up on planting progress.

 

Soybeans

Soybeans finished with mild losses Tuesday in a quiet, low range session.

Daily sales reports had 130,000t of old and new crop beans going from the US into Argentina, reminding the market of the demand realignment that can occur if China’s tariff increases are enforced.

Soymeal finished up US30c/t, while soy oil was down 3 points.

Wednesday was a different story, with the market finding a sharp bid, as more optimism builds about the US China trade spat as the Trump government sent a delegation to China to try and smooth out their current situation.

Support also came from soymeal, which rallied due damage at the largest export terminal in Argentina, caused by a vessel hitting the dock, causing ongoing delays and increases in free on board (fob) premiums.

Soymeal was up $4.20/t, while soy oil was down 21 points.

 

Canola

Canola finished lower, following weakness in the vegoil market.

Fund selling was also noted as new crop weather in Canada improves and the market anticipates large increases in intended area, when Canadian Statistical Agency, Statscan, reports on Friday.

 

Australia

The 8-day forecast for Australia remains dry, as we pass the critical planting date of Anzac Day.

The longer-term forecast is suggesting decent rainfall in two weeks’ time, but the 8-day seems to be the only forecast that we can rely on in Aus.

The dollar broke below .76, which should do good things for our flat price today. Flat price in old crop has been increasing on wheat, barley and canola in the east coast on the back of these moisture concerns. We don’t expect this to change anytime soon.

Source: Lachstock Consulting

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