Daily market wire 27 September 2017

Lachstock Consulting, September 27, 2017

Overnight markets:

Lower for grains and oilseeds.
  • CBOT Wheat was down -0.25c to 453.75c,
  • Kansas wheat down -1.75c to 452.25c,
  • corn down -1.5c to 352.25c,
  • Soybean down -7.75c to 974c,
  • Winnipeg Canola down -3.19$C to 498.6$C,
  • Matif canola up 2.75€ to 373.25€.
  • The Dow Jones down -11.77 to 22284.32,
  • Crude Oil down -US31c to 51.91US$,
  • AUD down to 0.788c,
  • CAD down to 1.235c, (AUDCAD 0.973)
  • EUR was down to 1.178c (AUDEUR 0.668).


Weakness in bean oil combined with rainfall in Brazil and no fresh sale announcements to lead beans lower. Oil was under pressure as the EPA sought industry input regarding potential cuts to the Renewable Fuel Standard. Beans closed right on their recent technical support, so the next movement will be crucial from a directional point of view. The likely catalyst will be any potential yield surprises as harvest pace increases.


Corn finished slightly lower, holding its ground surprisingly considering the weakness in beans. Brazil’s rain will have a positive impact on corn production there, which is already adequately supplied with old crop. Corn is lacking momentum in either direction for the moment with the burden of a 2.2 billion bushel carryout capping any nearby rally potential. Like beans a yield surprise in the US could provide further downside, though the Commitment of Traders structure in corn is getting hefty.


A stronger dollar and weakness in veg oils and soybeans led canola prices lower.  Chinese price inquiry has been limited which is creating order flow issues as harvest pace continues.


Wheat made new monthly highs before settling slightly lower, though maintaining itself over US450cents/bushel in Dec. Implied volatility in Dec Soft Red Winter whet futures went out at 19.25 per cent. Russian prices remain stable, with market ideas for the crop size sitting around 81-83 million tonnes (Mt) and export potential sub 31Mt. Matif futures finished at 7-week highs, thanks to a weaker Euro. Australia’s crop potential is below 20Mt, the question now is how much exports we can achieve, with the high volumes of cheap Hard Red Winter wheat available to Asian consumers. There is enough bullish information around at present to keep futures supported, though something new is required to see a break out session.


Aussie forecast features 10-15 mm of rain for southern Queensland, which won’t have much yield impact given how close they are to winter crop harvest. There is nothing in the forecast for Victoria and NSW in the next 8 days, which should result in further downside revisions. Cash markets behaving as expected given the shrinking crop size, with low liquidity seeing very high basis premiums. Market is still cautious to sell this though, given varying opinions on inelastic demand. The Queensland rain might offer some optimism for the sorghum crop, but more is required to encourage planting in the South West Queensland swing area, where a crop would be necessary in order to achieve an above average state crop.

Source: Lachstock Consulting


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