Markets

Daily market wire 4 July 2017

Lachstock Consulting, July 4, 2017

Overnight markets:

Off to the races again for grains and oilseeds. US markets now closed for 4 July holiday.

  • CBOT wheat up 29c to 555c,
  • Kansas wheat up 30c to 559.5c,
  • Corn up 7.5 c to 388.5c,
  • Soybeans up 23c to 970c,
  • Winnipeg canola up 13.60$C to 484.4$C,
  • Matif canola up 4.25€ to 366.25€,
  • Dow Jones up 129.63 to 21479.27,
  • Crude Oil up 1.03c to 47.07c,
  • AUD down to 0.76562c,
  • CAD up to 1.30049c (AUDCAD 0.99576),
  • EUR down to 1.13631c (AUDEUR 0.6737).

Wheat

Wheat closed limit up again, with Minneapolis leading the charge to break through key resistance at $8. The hot forecast from Friday was confirmed and increased from a heat perspective in the Northern plains, with conditions in Canada and spring wheat areas expected to decline further. The 4 July holiday gives the US market a good chance to catch its breath and remember the large carryout stocks we have as insulation, not to mention the expensive relative value of all US grains, aside from soft wheat. This has been an impressive run, but global stocks are still loose and it doesn’t feel like fundamentals are driving current price action. With the Commitment of Traders expected to now be net long in all wheat contracts, it’s difficult to see a heap of follow-through buying unless crop conditions on Wednesday really exceed market expectations.

Corn

Corn was an underperformer again vs. wheat and soybeans, closing 10 cents below its highs, as the GFS forecast came out cooler than expected. Cash markets in corn have noted active grower selling on this rally, despite the poor relative performance. The corn balance sheet remains heavy in old-crop at a local and global level, with US exports not expecting huge demand, given available South American supplies. We are now entering a crucial period in corn weather for new-crop, so perhaps we are seeing support build from that. The Northwest Cornbelt is much warmer and dryer in the 10 long-range forecast, while some rain is forecast for the southeastern parts in the same period. Given the weather that corn has to overcome, we expect the wheat/corn spread to give some back.

Soybeans

Soybeans closed stronger again, supported by outside market strength, weather and structure. Although there were larger-than-expected acres in Friday’s USDA report, most of those increases came from North Dakota, Minnesota and Kansas, which are not traditional soybean areas and are also under extreme heat stress at present. It appears the USDA put beans in there after wheat abandonment, but the market is not convinced this will eventuate. The record short in beans will be getting covered based on this price action, how much will determine how high we go.

Canola

Canola was stronger in November, supported by a hot weather forecast, outside market strength and a tight old-crop situation. The July contract reminded the market of this, exploding $21.3 as it entered delivery. The stronger dollar was ignored today, with production concerns the main driver.

Australia

The forecast for Victoria looks to have improved slightly, with 10-15mm and reasonable coverage, while the patchy showers for WA and SA look to be patchier and carrying less moisture. Southern Queensland is looking at falls of 10-15mm, while NSW looks dry in the grain-growing areas. Cash markets are busy for the first time in a while, with basis getting crunched yesterday, though the volume traded is unclear. Old-crop barley crop is strong and hard to find, while it looks a little discounted in new-crop due to the strength in wheat. This rally represents a great scale in opportunity for new-crop sales, which the market looks to have been busy doing.

Source: Lachstock Consulting

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