Daily market wire 4 September 2017

Lachstock Consulting September 4, 2017

Overnight markets:

US and Canadian markets are closed today for a public holiday.  Friday’s futures markets saw prices mixed for grains and oilseeds.

  • CBOT Wheat up 4.25c to 438.75c,
  • Kansas wheat up 2.5c to 438.75c,
  • Corn down -2.5c to 355.25c,
  • Soybean up 4.25c to 949.5c,
  • Winnipeg Canola down -1.30$C to 503.8$C,
  • Matif canola up 0.5€ to 370€.
  • The Dow Jones up 39.46 to 21987.56,
  • Crude Oil up US12c to US$47.35,
  • AUD up to 0.796c,
  • CAD down to 1.239c, (AUDCAD 0.986)
  • EUR down to 1.185c (AUDEUR 0.672).


Spring wheat prices declined as yield prospects improved and longs exited their positions. Soft Red Winter (SRW) wheat and Hard Red Winter (HRW) wheat futures both showed good strength, due to stronger global cash prices, strong internal basis and some mild short covering. The September wheat contract failed to register any deliveries, which is giving the market some strength, with basis discouraging physical deliveries against the contract. Implied volatility in the SRW December contract went out at 20.5 per cent (pc). Global cash prices are strengthening thanks to a stronger Ruble, which rallied almost 1pc. The EU doubled its import tariff on corn and sorghum, which will encourage more domestic wheat consumption. The weekly Commitment of Traders (COT) report revealed a mild increase in the short position with SRW at -99,800 vs. -96,100 contracts, HRW is +13,300 vs. 25,200 contracts and spring wheat is +6,200 vs. +6,800 last week. Concerns are building for the Argentinian wheat crop and whether severe flooding will impact yield potential. With prices on the rise in Russia and production in the other major 7 exporters declining year on year, it feels like the market has enough doubt to sustain current pricing.


Canola was slightly lower in spite of a weaker CAD. The tight global balance sheet, combined with strength in oil, should see canola supported going forward. For the moment, the market is pricing itself into increased crush demand and time will tell how long the supply/demand balance sheeet allows this.


Corn slightly softer after agribusiness intelligence provider, Informa, came out with the same yield estimate as the USDA. Despite last week’s rally, corn still has a heavy balance sheet to overcome and demand is not appearing in style to reverse this position in a hurry. There are some positive demand signals, with Vietnam removing its import ban on US DDG’s, though a lot more demand is needed to prevent further price softening. The COT had the corn position at -108,800 contracts vs. -81,800 last week.


Soybeans were stronger again, as was bean oil, which rallied 61 points. The rally in bean oil shows great technical strength and suggests further upside in the near term. The USDA reported higher than expected monthly crush figures with 155.61 million bushels crushed for July, which is 5pc higher than June and 1.4pc higher than July last year. The COT revealed an increase in the short position at – 65,800 contracts vs. -56,100 contracts last week. Some of the major forecasters are calling for higher than expected bean yields with some now sitting above the USDA’s figure of 49.4 bu/acre.


Aussie weather features no significant rainfall events. NSW and Southern QLD are the areas in most need of good spring rainfall to help recover the crop. Cash markets are reacting accordingly with new and old crop bids firming throughout last week.


Source: Lachstock Consulting


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