Markets

Daily market wire 3 May 2018

Guest Author, May 3, 2018

Overnight markets

Mixed for grains and oilseeds.

  • CBOT wheat down 2.5c to 526.75c,
  • Kansas wheat up 2.25c to 555.25c,
  • Corn down 0.75c to 405c,
  • Soybeans down 10.25c to 1043c,
  • Winnipeg canola down C$1.20 to $528.90,
  • Matif canola up €3.75 to €354.25,
  • Dow Jones down 174.07 to 23924.98,
  • Crude oil up US43c to $67.68 per barrel,
  • AUD down to 0.748c,
  • CAD up to 1.288c (AUDCAD 0.964),
  • EUR down to 1.194c (AUDEUR 0.626).

Macros played a large part today, with the US Federal Reserve leaving rates unchanged, but suggesting that future rises are not far away. This led to relative weakness in other currencies. The Euro has fallen 1 per cent over the last two sessions, which is helping to support European grains and oilseeds. The ruble also fell out of bed, shifting 1.6pc in yesterday’s session.

Wheat

Wheat finished with slight losses in a whippy session that made new two-month highs before breaking lower. Implied volatility in July Soft Red Winter (SRW) wheat went out at 29.6 per cent. More short-covering was noted in SRW, with the focus shifting from US yield potential to dryness in Russia and Australia, which saw futures break the March highs. However, some showers appeared on the Russian forecast for next week, which led prices lower later in the session. Hard Red Winter (HRW) gained support from unfavourable tour results that suggested lower yields than the first day’s feedback did. Export sales are likely to remind the market of the limited demand that current prices are buying, though this is likely to be discounted, subject to a vast improvement in the weather forecast. In Europe, Matif futures were supported by the lower currency, while Russian values were unchanged. Russian values are now trading at hefty discounts to other high-protein wheats, with German what $15 per tonne over, and HRW $45/t over. Despite the weaker ruble, growers do not seem to be comfortable sellers, which could be attributed more to currency volatility than weather at this stage.

Corn

Corn made highs not seen since July last year, but finished fractions lower in a tight-range session. The Brazilian crop forecast is declining daily, thanks to ongoing dryness and hot conditions. This puts further pressure on US yields, given the shrinking carry-out and production potential for global and US corn. The USDA’s 10 May World Agricultural Supply and Demand Estimates report is expected to show a significant reduction in corn supply, and the market is factoring in further production cuts in Brazil, which may not be reflected in this report.

Soybeans

Beans finished lower, with the weight of trade-war concerns encouraging further selling. Chinese importers have no intention of touching US beans until the issues are resolved. They only need to look at the haircuts some US sorghum importers have taken to get an idea of how bad things can be. This will be reflected in export sales tomorrow, and should add further pressure. Soymeal was down $3.70/t, while oil was 27 points higher.

Canola

Winnipeg canola finished lower in old-crop, as the inverse continues to diminish. Grower selling remains limited, but volumes have increased as traders speculate on old-crop supplies and the limited scope for demand when new-crop conditions improve. In Europe, it was a different story, with Matif futures rallying thanks to the stronger Euro.

Australia

More of the same for Australian cash markets. The next 18 days of weather forecasts feature no significant rainfall. This combined with weakness in the currency has prompted aggressive flat-price increases for old and new-crop wheat, barley and canola. This dryness will not kill the crop, but if we don’t have any rainfall before the beginning of June, we are in store for yield penalties if conditions revert to normal from there. The weaker dollar, and strength in local prices and futures, is providing some attractive price opportunities for high decile 18/19 and 19/20 prices. Other than that, the market is victim to the forecast, as we are not buying much export demand at current prices.

Source: Lachstock Consulting

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