Markets

Daily Market Wire 27 July 2018

Lachstock Consulting, July 27, 2018

Mixed for grains and higher for oilseeds.

  • CBOT Wheat was down -6.25c to 536.5c,
  • Kansas wheat down -6.75c to 534c,
  • corn up 2.25c to 361.5c,
  • soybeans up 0.5c to 861.25c,
  • Winnipeg canola up 3.30$C to 492.8$C, and
  • Matif canola up 3.25€ to 369.25€.
  • The Dow Jones up 112.97 to 25527.07,
  • Crude Oil up 0.35c to $US69.65 per barrel,
  • AUD down to 0.737c,
  • CAD up to 1.306c, (AUDCAD 0.964) and the
  • EUR down to 1.164c (AUDEUR 0.633).

 

Wheat

The wheat market ran out of new buyers overnight after rallying up to US10c/bu higher yesterday afternoon AEST. Strong US farmer selling was noted.

There was not bearish fundamental news, just a lack of price action.

Matif wheat paused for breath, down €1.75/t to €204.50/t.

The next leg-up comes from consumer coverage, if they chose to acknowledge the bullish potential of this market. The International Grains Council cut global wheat production down 16 million tonnes (Mt) to 721Mt (USDA at 736.2Mt).

Whispers of a Russian export ban were quashed today with those close to the market highlighting the government’s recent extension of their zero export tax on wheat.

In the US export sales came in below expectations at 338,500t.

Day 2 of the Wheat Quality Council’s tour saw yield results below the 5-year average which increases the probability of the USDA reducing their production figures in the next update.

Corn

Corn finished higher in spite of lousy price action in wheat and beans.

Strong exports and speculation on lower US yields was enough to prompt some short covering.

Corn has a large spec short to exploit and there are many reasons building to make this an uncomfortable position.

Export sales came in at 338,500t in old crop and 747,500t in new crop.

Soybeans

Soybeans finished fractions higher, after yesterday’s rally that was prompted by the EU agreement to purchase more US soybeans.

Export sales came in above expectations at 538,000t in old crop and 963,000t in new crop. New crop demand is still moving steadily with total sales 63pc higher than last year’s figures for the same time. Obscure demand from non-traditional importers is exceeding expectations given the price disparity between the US and Brazil.

This move by Europe is said to have taken China by surprise and the government is apparently negotiating with feed manufacturers to reduce protein amounts that soymeal would traditionally provide (perhaps this is another supportive factor for Aussie feed grains).

Soymeal was up US$2.60/t, while soy oil was down 26 points.

Canola

Canola punched higher in both Europe and Canada with minor Canadian production concerns doing enough to encourage short covering.

If Canada has an issue too, then work needs to be done from a relative value perspective given how much Europe has gained.

Australia

Aussie markets had a rocket under them yesterday in cereals, after the near limit-up CBOT movement was met with a very dry three-month outlook from the BOM.

New crop led the charge on the east coast with values moving A$17/t on the previous day.

Ignoring the world situation, the outlook from the BOM reduces the potential for August rainfall which was the only saving grace available to NSW and SA production.

If this outlook is confirmed then current crop estimates are way too high.

The 8-day appears unchanged, not delivering the 15mm promised for NSW on Monday.

At this stage the Aussie and global markets have a lot riding on reasonable WA production which looks fine for now in the central and northern regions, but questionable in the south.

It’s unlikely to happen, but if WA production had a sharp drop, then the Aussie balance sheet is getting close to unsolvable levels given the potential deficits on the east coast.

Source: Lachstock Consulting

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