Markets

Daily Market Wire 6 February 2020

Lachstock Consulting, February 6, 2020

Wheat and canola settled 1pc higher.

  • Chicago wheat March contract up 4.75 cents per bushel to 562c;
  • Kansas wheat March contract up 4.75c to 473.75c;
  • Minneapolis wheat March contract up 3.5c to 535.25c;
  • MATIF wheat March contract up €3 per tonne to €193.75/t;
  • Corn March contract down 1.5c to 380.75c;
  • Soybeans March contract up 0.5c to 880c;
  • Winnipeg canola March contract up C$6.80/t to $461.70/t;
  • MATIF rapeseed May contract up €2/t to €393.75/t;
  • Brent crude March contract up US$1.32 per barrel to $55.28;
  • Dow Jones index up 420 points to 29,228;
  • AUD unchanged at $0.6740;
  • CAD unchanged at $1.328;
  • EUR down at $1.099.

Market news

The bounce back has continued for wheat, with Chicago ending +4 3/4¢ to 562¢, KC +6.5¢ to 473 3/4¢, Minny +3.5¢ to 535 1/4¢, and Matif +3€ to 193.75€ on the earlier close.  Corn slipped lower though, closing down a cent and a half to 380 3/4¢ while beans picked up half a cent to 880¢ (Winnipeg continued to jump, up $6.8 to $461.7, Matif +2€ to 393.75€).  Macro markets remain optimistic, and crude oil has picked up a buck and a quarter to $50.8 ($55.4 WTI) and the DOW is back up another 420 points.  The AUD’s at 67.4¢, the CAD $1.328, and the EUR has dropped to $1.099.

Coronavirus cases continue to push up and more quarantine restrictions are going into place, including a 14-day quarantine by Hong Kong on arrivals from the mainland.  There are ongoing questions about the accuracy of published case data though, and efforts by the Chinese government to suppress “rumours”, many of which reflected frustrations about the government’s failure to respond to the situation, are not helping to encourage faith in the data.

On the upside, we’re also starting to see more “recovered” figures come out, which take more time to confirm than a death.  Economic slowdown concerns remain prevalent although hard to quantify.  To that note, many are blaming the new Baltic Dry Index lows, which have sparked some renewed interest in bulk freight markets, on weak Chinese demand from the virus outbreak.  Although physical bookings have remained very slow post Chines New Year with much of the country still shut down), the index has been trending down since late 2019 because bulk demand was already relatively weak; slow coal and iron ore being big factors.

As we mentioned the other day, despite talk of “flexibility” in trade commitments to the US, Chinese buyers have been back in the markets for South American beans. There’s talk of sales booked yesterday about 15¢/bu below PNW offers, and cheaper out the curve.

We’re also fielding comments about more activity on Ukrainian corn.  Firm domestic Chinese prices mean that the grain pencils very well against the domestic market under the Tariff Reduction Quota rules, and Sinograin domestic sales are not expected to significantly cut the margin.  However, to flog the dead horse, there’s still no sign of any US origin interest.

Meanwhile, updated ethanol figures were up to 1.08 million barrels per day (+52,000 vs last week) and stocks figures were down about 3pc (-770,000) after solid export activity.

On the corn side, the Russian ag ministry is calling for corn acres there to increase by nearly 8pc y-o-y amounting to 2.8 millon hectares, still a small drop compared to other exporters, but growing.

Despite the delayed plantings in spots, Brazil’s Mato Grosso Institute of Agricultural Economics (IMEA) is also pencilling a safrinha corn crop up 5pc y-o-y.

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Australia

Back locally, rains have been a little bit light across the western Downs relative to hopes, with some areas only seeing drizzles in the 10 mm range, but it is highly variable, with some spots further east and north pushing >150 mm.  Rains should continue through today and into tomorrow and hopes remain high for further accumulation.  Grain markets remain relatively subdued amidst the rain optimism.

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