Markets

Daily Market Wire 5 November 2019

Lachstock Consulting, November 5, 2019

Markets mostly lower and US dollar was firmer.

  • Chicago wheat December contract down 6.25 cents per bushel to 509.75c;
  • Kansas wheat December contract down 3c to 423c;
  • Minneapolis wheat December contract down 7c to 524.25c;
  • MATIF wheat December contract down €1.25 to €176.75;
  • Corn December contract down 6c to 383.25c;
  • Soybeans January contract up 1.25c to 938c;
  • Winnipeg canola January contract up C$4 to $462.20
  • MATIF rapeseed February contract up €3.75 to €386;
  • Brent crude January contract up $0.44 to $62.13;
  • Dow Jones index up 114.75 points to 27462.11 points;
  • AUD weakened to US$0.6884;
  • CAD weakened to $1.3150;
  • EUR weakened to $1.1128;

The up/down uncertainty in US futures is understandable leading into the November USDA report and explains the level of uncertainty around the markets’ expectations.

The USDA wheat balance sheet needs some work, depending how aggressive the USDA wants to get.

Historically the wheat market gets its direction from supply – at the moment however it’s both sides of the balance sheet that need attention.

Australia and Argentine wheat production should be lowered – even if only by 2-3 million tonnes (Mt).

On the demand side it will be interesting what the USDA does with Kazakhstan and Iran because both countries are clearly pulling on supply given seemingly lower production and arguably higher demand.

If the USDA is only using the spread between Black Sea prices and Matif it’s clear where the changes need to be made. But French wheat is now looking attractive on a relative basis and should win some more discretionary demand. It needs to.

The North African inelastic French demand has been eroded as more countries take Russian so the French wheat trader needs to fight for every tender.

Australia

Locally, activity is slow, with the southern market quiet due to cold/wet conditions bringing harvest to a stand-still and traders more interesting in studying form guides rather than cash bids.

The forecast remains dry for the next 8-10 days and should see crops dry out through NSW to continue with harvest.

Victorian harvest is yet to really kick into gear.  After a kind finish yields are expected to be very good, a turnaround from last year.

Prices though are now around $90/t lower on wheat and $140/t lower on barley compared to this time last year in Victoria.

In New South even with a smaller crop we are seeing values $75/t lower on wheat and $120/t lower on barley than this time last season.

So, at current Aussie wheat values can the trade still ship 7.5-8Mt of exports in a year where Australia produces somewhere between 15.5-16Mt?

Markets remained relatively unchanged across the boards and with the big race that stops the nation Melbourne-based trade houses will be closed for the day. Good luck to all the punters out there!

 

 

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