Markets

Daily Market Wire 6 April 2022

Lachstock Consulting, April 6, 2022

US wheat prices gained 3pc, soybeans and meal gained 2pc. Corn and canola were a mixed bag, corn losing ground to wheat.  The higher Australian dollar moderated the offshore wheat price move, the Dec-22 swap A$14/mt higher on the day.

  • Chicago wheat May contract up US35cents per bushel to 1045.25c/bu;
  • Kansas wheat May contract up 45c/bu to 1082.75c/bu;
  • Minneapolis wheat May up 26.75c/bu to 1111.75c/bu;
  • MATIF wheat May contract up €0.75/t to €364.50/t;
  • Black Sea wheat July contract up $0.50/t to $355/t;
  • Corn May contract up 9.25c/bu to 759.75c/bu;
  • Soybeans May contract up 28.75c/bu to 1631c/bu;
  • Soybean meal was up 2pc;
  • Winnipeg canola November 2022 contract down C$1.60 /t to $1000.70/t;
  • MATIF rapeseed November 2022 contract up €12.50/t to €802/t;
  • ASX July 2022 wheat contract up A$10/t to $403/t;
  • ASX Jan 2023 wheat contract up $11/t to $406/t;
  • AUD dollar firmer at US$0.758.

The Reserve Bank of Australia concluded its two-day monetary policy meeting on Tuesday morning and did what most analysts were expecting. It left its interest rate unchanged at 0.10pc and warned about the growing crisis in Ukraine. It noted that this crisis was leading to higher prices of raw materials and basic products as supply chain challenges persist. The RBA expects that the Australian unemployment rate will remain below 4pc in 2022 and 2023. Nonetheless, while the wage growth has been there, it is around the relatively low rates that existed before the COVID-19 pandemic. The most closely watched statement was on the bank’s view about inflation. In the statement, the bank said that the headline inflation is about 2.6pc in Australia . The statement said: “Inflation has picked up and a further increase is expected, but growth in labour costs has been below rates that are likely to be consistent with inflation being sustainably at target.” Analysts interpreted this move to imply that the bank was now ready to start hiking interest rates. In the previous meetings, it had hinted that the first interest rate hike will be in 2023. Now, analysts are pricing in the first hike to be in June this year. First, the RBA will likely not want to be left behind by other central banks like the Federal Reserve and the Bank of England. Further, like other banks, it will likely want to have tools at its disposal in case of another global recession.

Post last night’s move the AUD looks solid on the charts with the next meaningful resistance level at 0.7800.

US winter wheat crop conditions are the worst on record for this time of the year. Particularly concerning are the states of Oklahoma and Texas, both large HRW producers and will be the first to start harvest. The clock is ticking for any meaningful bounce back and balance sheets will be sensitive to any incremental demand stemming from the Russia/Ukraine war.

West Texas Intermediate crude oil prices uncovered some selling last night as the US unexpectedly grew oil inventories. The weekly American Petroleum Institute report was expected to show a 2mbbl draw but actually showed a 1mbbl build.

Local trading activity picked up yesterday as the WA market found some support and bids and offers came together on wheat. We saw values a touch firmer on APW1 and H2 in the west while protein wheat found nearby support in the east. New crop eastern Australian wheat values were around $405-410/t APWMG. The ASX WM eastern wheat Jan 23 futures contract settled $11/t higher, at $406/t, with basis around -$80/t.

Barley markets continue wide bid offer spreads and liquidity thin. Low-grade barley offers are beginning to appear in the domestic market.

Canola markets were firmer yesterday on both current and new crop. New crop values pushed over $1000/t for non-GM ISCC Victorian port.

The canola balance sheet remains tight domestically, given the large export program Aussie has done. LSC’s last canola SnD forecast exports pushing over 5Mt.

 

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