Markets

Daily market wire 26 July 2017

Lachstock Consulting, July 26, 2017

Overnight markets:

Lower for grains and oilseeds, on low global cash pricing and a better than expected US weather forecast.

  • CBOT wheat down -14.5c to 499c,
  • Kansas wheat down -15c to 499.5c,
  • Corn down -8.5c to 382.25c,
  • Soybean down -16.5c to 986c,
  • Winnipeg Canola down -4.89$C to 495$C,
  • Matif canola down -2€ to 359.25€.
  • The Dow Jones up 119.37 to 21632.54,
  • Crude Oil up 1.489 to 47.83c,
  • AUD up to 0.79396c,
  • CAD down to 1.250c, (AUDCAD 0.993)
  • EUR up to 1.165c (AUDEUR 0.681).

Wheat

Wheat was lower across all classes. Spring wheat down 33 cents as crop scouts report eastern yields of 48.7 bu/acre vs. 43.1 last year. Declines are expected as the tour moves west but this was all the market had to work with. Egypt’s GASC bought 7 cargoes between $218-220 c&f, which will be originated from the Black Sea and Baltic regions. These prices were $20 over the US HRW offer. Russian wheat prices are $32 higher than they were last year, on a similar sized crop and with similar global stocks. Its hard not to see harvest pressure kick in here, although execution in Russia is more difficult this year due to new government VAT requirements. A mentioned previously, its not the global stocks that is the problem with this market, it’s the stocks in the major 8 exporters which are under threat due to production volatility in the US, Australia and Canada. Funds are long and we have at least a month before we reduce the crops further, so it’s hard to see wheat catching a bid in the near term.

Corn

Corn on the defensive as forecasts for 1.5-3.5 inches forecast for the Corn Belt. It has a lot of things going against it at the moment, its not buying export demand, the fund structure is long and recent weather has improved yield ideas, suggesting no major problems. Technically the Dec contract is heading towards Nov 16 lows, though the fun longs will do a lot to defend this level. Appears that corn will be range bound until production is more certain, hard to see it breaking too high or low from here.

Soybeans

Beans lower in a wild session, trading a 43-cent range. The market was up 10 cents at one stage as the declining crop conditions helped things catch a bid, but when the updated forecast came out, it was pummeled, finishing close to its lows. With US beans becoming competitive with Brazil and China back in the market, plus declining US crop conditions, its difficult to short beans from here, given the variability we have already seen in the US forecasts this year.

Canola

Canola lower again as the yield concerns and risk premiums dissipate. A weaker dollar could not help things today. Once production is solidified, demand is needed to ignite further upside longer term.

Australia

Australian forecast has better showers for northern WA that will help support moisture stressed crops there. NSW is set to receive 10-25mm in Central and Western regions. They really need 40mm to turn things around, but if realised this will buy some time. July rainfall in NSW has been terrible, so this will be welcome by farmers and could increase confidence in new crop sales and pressure basis. Aussie basis is probably overdone for now, current levels suggest the market is trading a significantly smaller new crop than we have forecast. We are expecting to see basis take a breather today.

Source: Lachstock Consulting

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