Daily market wire 28 August 2017

Overnight markets:

Mixed for grains, lower for oilseeds.

CBOT wheat up 0.75c to 435.25c,
Kansas wheat down 1c to 432.25c,
Corn down 2.75c to 353.5c,
Soybeans down 2c to 944.5c,
Winnipeg canola down 3.30$C to 506.9$C,
Matif canola down 1.5€ to 370.5€,
Dow Jones up 30.26 to 21813.67,
Crude oil up 0.43c to 47.86c,
AUD up to 0.792c,
CAD up to 1.247c (AUDCAD 0.988),
EUR up to 1.194c (AUDEUR 0.663).

Wheat

Wheat was mixed across the classes, with spring wheat and Soft Red Winter (SRW) wheat slightly higher. Implied volatility in Dec SRW went out at 20.75 per cent, with low volume and low trading ranges. Cash prices in Russia were stronger as harvest volume increases the cost of execution. On top of this, the ruble broke through key technical resistance in a good show of strength that could see ongoing support. This would reduce cash price liquidity there to the benefit of the global cash market. The weekly Commitment of Traders report had SRW at -96,000 vs. -74,600 contracts, Hard Red Winter at +25,200 vs. +40,100 contracts and spring wheat at +6,800 vs. +4,900 contracts. Wheat is doing everything it needs to do to cement last week’s losses as seasonal lows; demand is increasing, cash prices are rising and the fund short is increasing. We can’t ignore that world fundamentals are extremely burdensome, but this feels priced in for now, with limited potential for more bearish news.

Corn

Corn closed lower, seeking some kind of fundamental direction. The Profarmer tour reported yields close to that of the USDA at 167.1 bushels per acre vs. 169.4bu, while demand remains lackluster, due to the constant pressure of large, cheap South American supplies. We could see some support at today’s market opening given the potential impact Hurricane Harvey could have on unharvested areas.

Soybeans

Soybeans closed slightly lower in quiet trade. Hurricane Harvey has potential to affect bean area in the Delta regions; it pounded Texas over the weekend and may move east. This will affect unharvested corn and soybeans, which could see markets open higher this morning. The Profarmer tour estimates had beans at 48.5bu/acre vs. USDA’s 49.4bu. Demand remains supportive with the appearance of new Chinese demand. Meal was supported by new Thailand purchases. The oil market, which supported the complex last week, has consolidated, and is struggling to maintain momentum, suggesting it may fail and fill the gap it formed last week.

Canola

Canola closed lower in quiet trade. Varying harvest reports continue to come in, with southern Manitoba yields better than expected, while the central and western areas remain below market ideas. Cash markets remain strong and illiquid, with no-one willing to make a big move, given the uncertainty in the crop size and the potential for an explosive market, given tight old-crop supplies.

Australia

The Aussie forecast features nothing significant from a moisture perspective, but some alarming frost forecasts. There are some light showers forecast for Western Australia, Victoria, and southeastern New South Wales, but they do not appear to be significant enough to have any impact on new-season production. A large portion of NSW production area is expected to have temperatures between 0 and -5 degrees in the next two days, which should force reductions in crop ideas. Cash markets have been quiet, although flat prices seem to have done the work to uncover some demand. With limited moisture and increased production risk, it’s about time we increased Aussie cash premiums.

Source: Lachstock Consulting

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