International

The slide continues. Wheat rallies are always hard to hold when headers are about to get rolling. This year is the opposite of last year. Crops in the US and Canada are in good shape while it is the Black Sea and EU which are continuing to reduce production estimates. This creates an interesting market signal for the Australia traders. Australian wheat competes with Russian, not US, into its traditional markets and yet Chicago futures still heavily influence sentiment with both the producer and our closest consumers. Today will be a good barometer with Russian cash quoted unchanged and US futures settling 10-14usc/bu lower. 

It has been a while since there was so much focus on the fund roll but every wire I have read today suggests it is a major influence in the price action in Chicago. The way we view the world has the funds only short 17k contracts in Chicago wheat, about as benign as you can get. However, funds like the old Deutsche Bank need to roll out of July 24 into July 25 which is conceivably adding pressure to the curve. 

Indian Prime Minister Narendra Modi has got over the line in the Indian election but did not secure the massive majority many were predicting leading into the vote. His Bharatiya Janata Party did secure enough votes to form a government but remains short of the 272 seat majority. This is where my knowledge of Indian politics falls short, however, with much focus on the potential reduction or complete removal of the wheat import tariff, does this election change that prospect? 

GASC and Algeria went wheat shopping, buying a little over 1.2Mt. Last time GASC came to market, the price of Russian wheat was US$220/t fob and today it is the sunny side of $250/t. Maybe that is why they only bought Romanian and Ukrainian origin. 

SovEcon joined the party with a Russian wheat estimate at 80.7Mt vs 82.1Mt prior. The Russian Ag minister was solid at 85Mt with 132Mt all grains. 

The Australian dollar fell vs the US dollar as all indications point to a soft Q1 GDP number out today. ABS indicated company profits had fallen 2.5pc during Q1 which led Westpac to cut its forecast for the change in GDP to 0pc compared to previous quarter. This compares to the average other estimates of 0.2pc. Westpac projected year-on-year GDP growth of 1pc, Australia’s weakest pace of growth since 1991, accentuated when viewed in per capita terms given the population growth.

Australia