Grains and oilseeds exploded to close out the month, quarter and year, with wheat leading the charge.
- CBOT wheat up 30c to 526c,
- Kansas wheat up 30c to 529.5c,
- Corn up 11.5c to 381c,
- Soybeans up 26.25c to 947c,
- Winnipeg canola up 13.6$C to 498$C,
- Matif canola up 2€ to 362€,
- Dow Jones up 62.60 to 21349.63,
- Crude Oil up 1.4c to 46.33c,
- AUD down to 0.768c,
- CAD up to 1.296c, (AUDCAD 0.995),
- EUR down to 1.141c (AUDEUR 0.672).
Unlike last week, Soft Red Winter and Hard Red Winter (HRW) managed to stay on track with Spring wheat in this session. Implied volatility in Sep finished 4pc higher. The USDA report didn’t surprise on stocks, but it did on acres. Overall June stocks were higher than the market’s expectations. The real surprise was in the Spring wheat acres that came in at 10.9 million vs market ideas of 11.2m. Add this to already low winter wheat acres and we are at the lowest level since 1919! This was enough to encourage shorts to head for the door and square off their financial year, leaving wheat to finish off with its highest yearly close. Harvest news for HRW has the protein average up slightly, but not better than last year which was 11.2pc. The USDA brought their European wheat estimate down to 139mmt vs 141.3 in the last update. The Commitment of Traders (COT) report had wheat shorts at -63,500 vs. 75,400, but this is expected to be significantly lower after Friday’s session.
Corn lacked direction, but still managed a strong close thanks to wheat and soybeans, after a heavy USDA report. June 1 stocks came in above market expectations at 5.225 billion bushels, while acres came in 1 million over market expectations at 90.9. Despite its relative weakness in the session, corn broke through technical resistance that helped encourage firmer bids. Corn COT came in at -150,500 vs 95,300 contracts.
Soybeans were up and about, with the catalyst being what the USDA didn’t do. USDA stocks were slightly below market expectations at 963 million bushels. Planted area was left unchanged, which was a big surprise as the market was expecting a 500,000-acre increase in place of corn. Bean COT increased drastically to -146,700 vs 115,700, though we expect this will have moved a fair bit since Friday’s close, given that this data is compiled earlier in the week. Beans still have a heavy balance sheet, but structure and technicals have provided good support.
Canola took off, supported by soybeans and mounting concerns for dryness in the Prairies. USDA brought acres up 234,000 from their last report. This did not have a huge impact, given that the market is more focused on crop conditions and yield projections. EU canola projections came in 200,000t lower at 21.7mmt.
Australia has received some reasonable rain over the weekend, but a lot more is required. WA received 5-15mm with reasonable coverage last week, though it did miss the thirstiest of the state’s four port zones, Geraldton. SA got 5-15mm in patches, but the western parts of SA needs 25-40mm to prevent yield declines. Northwest NSW got some rain, but probably not enough to encourage wheat planting, with acreage revisions on the cards there. Looking ahead, the forecast for WA and SA looks patchy, while Victoria is set for a timely top-up. Nothing major is expected for NSW. Cash markets will provide a lot of clarity today, following on from the Chicago Board of Trade’s performance on Friday. We will determine just how much unsold tax tonnes have been hiding and basis will tell that story. Old crop is still close enough to full carry, so if the tax tonnes aren’t there, it will be interesting to see how much we erode this.
Source: Lachstock Consulting