Daily Market Wire 7 June 2018

Lachstock Consulting, June 7, 2018

Higher for grains, lower for oilseeds.

  • CBOT wheat up 9.75c to 519.75c,
  • Kansas wheat up 10.75c to 539.75c,
  • Corn down 5.5c to 378.25c,
  • Soybeans down 7c to 994.25c,
  • Winnipeg canola down C$1.59 to $523.70,
  • Matif canola down €0.5 to €356,
  • Dow Jones up 346.41 to 25146.39,
  • Crude oil down US$0.50 to $65.01 per barrel,
  • AUD up to 0.766c,
  • CAD down to 1.29c (AUDCAD 0.992),
  • EUR up to 1.177c (AUDEUR 0.650).


Wheat markets added more risk premiums, finally paying attention to production issues in the Black Sea and Europe. Implied volatility in July Soft Red Winter wheat went out at 29.87 per cent. Hard Red Winter premiums are softening due to harvest pressure, but export business is still unlikely to be priced due to attractive storage revenue for local warehouses. Crop estimates in Europe and the Black Sea are declining, German crop estimates are down 1.1 million tonnes (Mt) at 22.9Mt versus 24.5Mt last year. Russian fob premiums increased today, with rumours swirling that international traders are unable to get export quotas for the port of Novorossiysk. Weather-wise, things are unchanged in the Black Sea, with winter wheat areas too dry, while spring wheat areas are too wet. Crop estimates are being revised in Russia, with 72Mt now a realistic figure. In Europe, there are mounting concerns for conditions in central Europe where conditions are too wet.


Corn fell victim to fund selling, with more rainfall forecast for the central plains. Corn’s yield potential will, however, be determined by July weather, which makes the current price weakness seem like more of a buying opportunity than anything. Export sales tomorrow are expected at 750,000t of old-crop and 300,000t of new-crop. Ethanol production came in at similar levels to last week at 1.04Mt. Old-crop corn continues to find strong demand, so the market needs to be careful with how much corn yield they put in the bank now, given the tight local and global outlook.


Soybeans were under pressure from improved United States conditions, weaker South American currencies, and ongoing uncertainty regarding US-China trade negotiations. China’s offer to import $70 billion worth of US agricultural and energy goods has been ignored so far by the US government, placing more uncertainty on the prospects of a resolution. The US import tariffs are supposed to kick in on 15 June, so a resolution will occur before then, but no-one knows what it will looks like. Soymeal was down $2.30 per tonne, while soy oil was down 14 points.


Canola suffered in sync with beans and veg-oil markets, with a stronger dollar also contributing to the weakness. Nearby contracts continue to break lower than new-crop contracts as the inverse continues to leak. Matif futures didn’t break as hard as Winnipeg, with a downside crop revision  of 202,000t in Germany preventing aggressive selling.


Aussie markets were still reasonably active yesterday, with consumers continuing to buy, despite the positive nearby weather forecast. This is a rare occurrence, as consumers love using weather forecasts to pressure the market, so the fact they have continued to buy before the event suggests that they can’t risk its failure. The forecast hasn’t changed since yesterday, with 15-25 millimetres expected across Victoria, South Australia and southern New South Wales. The key to this forecast will be what it does for NSW, because aside from Queensland, it remains the only problematic area for Australia’s new-crop at present.

Source: Lachstock Consulting



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