Markets

Daily Market Wire 28 January 2020

Lachstock Consulting, January 28, 2020

Markets softer overall with worries about stagnant Chinese demand and impact of coronavirus.

  • Chicago wheat March contract down 1.2 cents per bushel to 572.2c;
  • Kansas wheat March contract up 4c to 486.4c;
  • Minneapolis wheat March contract down 0.2c to 547.2c;
  • MATIF wheat March contract up €1.25 per tonne to €194.25/t;
  • Corn March contract down 6.6c to 380.4c;
  • Soybeans March contract down 4.6c to 897.2c;
  • Winnipeg canola March contract down C$8/t to $461.50/t;
  • MATIF rapeseed February contract down €2.75/t to €403.50/t;
  • WTI crude March contract down US$1.05c per barrel to $53.16;
  • Dow Jones index down 454 points to 28,536;
  • AUD weaker at $0.676;
  • CAD weaker at $0.7579;
  • EUR weaker at $1.102.

China impacts markets

Grains broke off firmly to start the week, but firmed up slightly later in the session.

Row crops came under hard pressure amid concerns about coronavirus and generally lackluster demand from China, in part due to its Lunar New Year holiday travel. Coronavirus fears have continued to expand as the official number of reported cases and deaths creeps up.  Many continue to believe official figures are underplaying the reality.  Reduced travel and holiday spending are driving down the market with concerns about demand destruction.  In China, some official quarantine zones are in place, and likely to remain that way for a while, while other governments have begun setting up travel restrictions beyond official quarantine zones, and the holiday has been extended in many places to avoid people returning to work during the outbreak.

Egypt has stated it has “sufficient” strategic reserves of wheat; normally Egypt will follow this up with another wheat tender, so all eyes open.  The latest Saudi Arabian barley tender results have come in in the low $220s/t range for Red Sea ports, and around $230/t for the Persian Gulf.  This works back best to Black Sea origination, with potentially an Argentian cargo too, but also prices in range for shipments from northern  Europe and Baltic ports which are more readily available for the Saudi tender’s timeframe.  Given relatively weak demand overall on global barley, it looks to be a seller’s game, with plenty of flexibility to cover.  US export inspections were mediocre at best with 224,000t of wheat, 670,000t of corn, and 1.04 million tonnes of soybeans, all at or below market expectations.  On sorghum, two US cargoes to China mentioned in a previous report as unknown sales have been confirmed.

Australia

Speculation persists about China’s volume buying of Australian wheat, with the latest word being China bought a further four cargoes on Friday.  Lachstock cannot see where any such purchases would make sense to the market, but cannot rule out some wheat purchasing from China to follow previous sales now being executed.

Reports about malting barley business to China being written make far more sense than wheat, but its market has continued to firm, and rumors of sales to China certainly add support.

Recent days have seen some great rain across parts of northern Queensland, and a few spots on the Liverpool Plains of northern New South Wales have received more than 50 millimetres.  We’re still a long way from spring 2020 planting, but the moisture is slowly starting to rebuild subsoil profiles.  More rain is forecast into this weekend, with the latest models predicting 15-20mm or more across most of South Australia and southern Victoria,  and the chance of showers in north-eastern NSW again.

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