Markets

Daily market wire 6 September 2017

Lachstock Consulting, September 6, 2017

Overnight markets:

Higher for grains and oilseeds. Macro influences played a big part in price action today, as the USD index suffered losses as the market priced in the associated risks of mounting tensions with North Korea. The Index is looking very weak technically and is poised to break resistance formed in Feb 16, which would suggest a significant move lower.

  • CBOT wheat up 4.25c to 443c,
  • Kansas wheat up 6.25c to 445c,
  • Corn up 3.25c to 358.5c,
  • Soybeans up 19c to 968.5c,
  • Winnipeg canola up 0.199$C to 504$C,
  • MATIF canola up 1€ to 370€,
  • Dow Jones down -230.95 to 21756.61,
  • Crude oil up 1.32c to 48.61$US,
  • AUD up to 0.799c,
  • CAD down to 1.237 (AUDCAD 0.989),
  • EUR up to 1.191c (AUDEUR 0.670).

Wheat

Soft Red Winter (SRW) and Hard Red Winter wheat contracts closed higher, while spring wheat suffered slight losses. The weaker USD helped support winter-wheat futures, increasing their prospects for export. Implied volatility in Dec SRW went out at 20.5 per cent. Global cash prices have stabilised since last week as demand appears to be better than expected, and the ruble continues to strengthen. The ruble returned yesterday’s losses to finish higher, which is a good barometer for global cash prices at the moment, given the significant volume of unsold grain there, and Russian farmers’ ability to hold off when local prices are unsatisfactory.

Corn

Corn shared some of the ride with beans, as mild short covering and better-than-expected export sales also contributed. The weekly crop progress report had corn 1pc lower at 61pc good to excellent, while export inspections came in at 797,500, which indicates a higher pace than last year. Corn feels supported for now until next week’s USDA report, where yield forecasts will be revisited.

Soybeans

Soybeans led grain and oilseed markets higher today, as the weaker USD and declining crop ideas combined with increased Chinese demand to drive values higher. There is a school of thought that the bean crop didn’t have adequate moisture to grow well in the cool dry conditions experienced recently; this would imply yield figures well below the USDA’s August number. Any downside revisions in the Sep report will encourage a bid in beans.

Canola

On account of weaker vegetable oils values, canola couldn’t follow the bean strength. Soybean oil was 21 points lower on a combination of overcrowded fund length and softer diesel prices. Harvest results are still coming in mixed for Canada’s production, while European production is starting to look lower than initially expected. The canola balance sheet is tight, and potentially needs to be showing more price strength than it currently is.

Australia

In Australia, the impacts from frosts two weeks ago in NSW are starting to be realised, with some significant damage noted, particularly in early-planted crops like barley, where potential losses could be up to 20pc. Wheat is not immune to the damage; it’s still early days, but potential losses are expected around 10pc for now. The 8-day forecast features no notable rainfall, which adds to the plethora of NSW concerns, given the requirement for follow-up rain to prevent further yield declines. Cash markets are responding accordingly, with new-crop barley and wheat both stronger as traders price in these new production ideas.

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