Grains and oilseeds futures were lower;

• • Chicago wheat July contract down 16.5c/bu to 490.75;
  • Kansas wheat July contract was down 22.75c/bu to 445.75;
  • Minneapolis wheat July contract down 13.5c/bu to 547;
  • MATIF wheat September contract down EUR3.50/t to 179
  • MATIF rapeseed August contract down EUR2.25/t to EUR367.50
  • Winnipeg canola July contract down $C2.90/t to $C450.20
  • Corn July contract down 10.5c/bu to 414.75
  • Soybeans July contract down 12c/bu to 869.75
  • Crude oil July contract down US$1.80/barrel to $51.68
  • Dow Jones up 207.39 points to 25,539.57
  • AUD down to 0.6966
  • CAD down to 1.3421
  • EUR down to 1.1225

Melting pot of factors affecting markets

Markets down overnight amid fresh trade war news – this time its rumours around Mexico retaliating to Trumps 5% tariff. This, coupled with some rain in Russia was enough to pressure the market lower as the debate around US planted area continues. This is an important point for me – the USDA WASDE report is released on the 11^th of June. This year is one out of the box with no real analogue year to compare it too – however, historically the USDA has been reluctant to make big changes in this report regardless of what is happening in the planting window. Back in 11/12 the USDA cut planted area by 1.5m ac which, given most estimates for this year are gravitating towards 10m acs its hard to see how the USDA will react. I feel like the market is trading 2 sets of numbers – those focused on where the USDA will come out in the June report and another balance sheet which reflects where this could end up. This makes the current price seem more reasonable – Dec-12 corn at 435usc/bu doesn’t correlate with the more aggressive ideas around yield and acreage but does allow for some modest cuts in the June report. The other extenuating input that the UDSA has to deal with is the delay in US farmers nominating their intention to take Prevent Plant insurance – ie, even though the last date to plant has passed, growers still have time to reconsider if they take it or not – many are in this boat in the hope Trump finalises the MFP additional payment that could be linked to prevent plant. Confused? Don’t worry, so am I. There are so many moving parts to this and even more when considering the impact it will have on Australian grain values.

Australia

Locally the patterns have shifted in WA. 5-15mm is forecast in the eastern belt with more as you move west. This would put to rest some of the concerns around longer term production estimates but, in the northern areas we have undoubtably changed some of the rotations with canola acres already impacted. Given many of these acres will find their way to barley is interesting when comparing the international market to the east coast market where many feeders are keeping barley in the ration for the fibre benefit. Fodder and roughage is a concern for the northern cattle market which may have to wait a little later than usual to access straw given the dryness. The flow on from this could be higher inclusion rates of barley as they seek as much fibre as possible.

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