Overnight markets:

US markets were closed for the 4th of July holiday.

• CBOT wheat closed
  
• Kansas wheat closed,
  
• Corn closed,
  
• Soybeans closed,
  
• Matif wheat was up 0.25€ to 185.75€,
• Dalian corn futures were down 7 RMB to 1681.
• Winnipeg canola was up 6.80$C to 504.8$C
• Matif canola up 2.75€ to 369€.
• Dow Jones index was unchanged due to market closure,
• Crude Oil up 0.009c to 47.08c,
• AUD down to 0.760c,
• CAD down to 1.293c, (AUDCAD 0.983)
• EUR down to 1.134c (AUDEUR 0.67).
  

Wheat

EU wheat futures only managed slight gains, though they still reflect new yearly highs. It is not expected that EU prices will track like for like with CBOT given the large Black Sea and Russian supplies which are set to be harvested, which should pressure cash markets in the region. Russian fob markets have not performed in line with the US strength. Similarly to our corn comment below, when the market is well supplied basis gets slammed on big rallies. This has been the case in all major production areas, with FOB premiums not rallying in line with the futures movement, which implies that the offer side of the market is willing and able to supply at lower prices, which at some point will weigh in on futures, when the speculative money stops playing. When the US markets open we have crop conditions report and winter wheat harvest progress after the close, which should provide some direction, in addition to the ongoing hot temperature forecast.

Corn

The correlation is not perfect, but given the recent strength in US markets you might expect that some kind of risk would price into the Dalian corn market. However their futures have been somewhat unresponsive to this move, particularly in USD terms, where the Sep futures have fallen approximately $5 in the last two sessions after failing to breach technical resistance around US$250. This is a good fundamental indicator of how the consumptive market is supplied, which provides some stability in the face of the US euphoria that is dominating markets at present. If the global balance sheet is adequately supplied (and it is), then the market can fall quite quickly when buyers are exhausted. What will stop this in the near term is weather with the US corn crop at a very sensitive developmental stage. Given that there is still a structural short position in corn, any weather issues could be over exaggerated if funds head for the door at the same time, as we have just witnessed in wheat. Its important to remember that the balance sheet is still heavy and the market will be reminded of that sooner or later.

Canola

Canola continued to show strength, forging a new 3 month high in the Nov contract. This was driven by a hot and dry weather forecast, that will threaten yield potential across most of the Canadian Prairies if realized in the next two weeks.

Australia

Aussie weather showing more patchy showers for central WA with approx. 25ml forecast over the next 8 days. SA is getting patchy showers, though very light and maybe not enough to keep parched crops going. Vic has 5-10ml forecast with good coverage, which will be a welcome addition to an adequate moisture profile. NSW missing out, while Queensland cropping regions looking at 10-15ml. Cash markets were conservative yesterday with US markets closed, meaning that grain was traded at very cheap basis levels. New crop prices have been very attractive from a budget and decile point of view, but grower selling has not been as strong as expected given the production uncertainty ahead of us.

Source: Lachstock Consulting