Markets

Daily Market Wire 31 January 2019

Lachstock Consulting, January 31, 2019

US Federal Reserve held interest rates unchanged (promising “patience”) and the market saw some positive earnings reports hit.  The value of the US dollar fell sharply.

  • CBOT wheat up 4 cents per bushel,
  • Kansas wheat up 2,
  • Minneapolis wheat up 3,
  • MATIF wheat unchanged. 
  • Corn up 4c
  • Soybeans up 1c
  • MATIF rapeseed up €1,
  • Winnipeg canola down C$1,
  • Dow Jones was up 425 points, spiking back over 25,000,
  • West Texas crude oil up a further 90c to US$54.20 per barrel, Brent $61.70
  • AUD lifted to $0.7260 from $0.7150 yesterday, as most currencies adjusted to a sharply lower US dollar.
  • EUR rose to $1.148,
  • CAD rose to $1.3127.

Wheat

The US cold snap has finally scared some speculators over winter kill (particularly in parts of the SRW belt, though also some of the uncovered areas of Kansas) but so far there’s little concrete evidence of the impact (and are unlikely to see real confirmation as such until the crops come out of dormancy).  Some longer term forecasts are calling for more of the recent large temperature swings into Feb/Mar, which does increase the risk of spring frost kill if wheat exits dormancy early before a cold snap.  The Russian Ministry of Ag was out calling for 76 million tonnes (Mt) of new season wheat production – though at this point it’s very speculative and will depend largely on spring weather.  Published Russian wheat stocks are apparently down some 21 Mt YOY, but no real surprise there given the realized tightening in markets through the last few months.  Even without government restrictions, cash markets continue to hold firm there with the hassle and cost of hauling grain from the deeper interior holding up origination costs.

US/China trade and USDA

US/China trade talks have kicked off again in Washington – with lots of speculation around how they may or may not progress.  Yesterday’s fraud charges by the US against Huawei are just another potential sticking point in a list of many.  Meanwhile, the USDA continues to push out report data that was delayed by the government shutdown, with more release schedules coming out from NASS and the FAS.  Export sales from December are due out later today, but we won’t see the (potentially) more interesting Jan sales until mid-Feb.

Corn and soybeans

Despite the lower yields, new crop Brazilian beans continue to price more demand to China (though this may swing around depending on the trade talks and promises made there).  Back in the US, ideas are beginning to bounce around again on corn/bean acres – with ongoing expectations for a sharp shift to corn acres (away from beans) given the depressed board and basis.    First-crop corn harvest in Brazil has been reporting lower yields than some expected.  However, the more significant safrinha crop is still being planted (much of the safra crop is consumed domestically).  Dry and warm weather remains on the outlook for much of the country, though there are some suggestions that the weather patterns may be shifting.  If confirmed, this shift bodes well for the safrinha corn crop – and some are also noting that the wet weather in Argentina may ultimately help out some of the corn growing regions (that were not completely flooded).

Source: Lachstock Consulting

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