Markets

Daily market wire 8 February 2018

Lachstock Consulting, February 8, 2018

Stronger for grains, mixed for oilseeds. 

  •  CBOT wheat up 14.25c to 460.5c,
  • Kansas wheat up 12c to 481c,
  • Corn up 1.75c to 365.25c,
  • Soybeans down 3.5c to 994.25c,
  • Winnipeg canola down C$1.10 to $504.4,
  • Matif canola up €1.75 to €350.
  • Dow Jones up 100.09 to 25012.86,
  • Crude oil down US$1.55c to $61.84 per barrel,
  • AUD down to 0.782c,
  • CAD up to 1.256c (AUDCAD 0.983),
  • EUR down to 1.227c (AUDEUR 0.637).

Wheat

Wheat took off, with funds hitting the escape button on short Soft Red Winter (SRW) positions, and adding to Hard Red Winter longs.

Implied volatility in March SRW went out at 20.85 per cent.

Conditions in US winter wheat areas are not improving at an appropriate rate, with the limited moisture received, and what is forecast not significant enough to warrant a tangible turnaround.

Another catalyst for funds was fears of cheap volatility being favored by money exiting other investments. The short wheat volatility play has worked for a long time, but with macro uncertainty forcing investment managers to rethink where they park their cash, maybe wheat is not such a bad prospect.

USDA’s World Agricultural and Supply and Demand Estimates (WASDE) are due out Friday, and the focus will mainly be on South American production.

Wheat remains a weather and order-flow story for now.

Corn

 Corn closed slightly higher, with positive ethanol production figures assisting an already declining old-crop balance sheet. Weekly production came in at 1.057 million barrels per day, up 17,000 barrels on the week prior.
Today’s range at 3 cents was mild, given the price action in wheat.
Brazil’s official CONAB data is due out tonight, and will have a large impact on corn, given that it will publish its first estimate for Brazil’s second-crop corn production.

Soybeans

Soybeans were off slightly after yesterday’s run, with Argentinian weather featuring the possibility of 15-25 millimetres of rain in the longer-term forecast.

There is a school of thought that even minor showers will not be sufficient to reverse production damage.

With CONAB out tonight to update Brazilian production estimates, and a WASDE report out Friday, there will be a lot of new fundamental fodder for the market to digest.

Soymeal was US$3.70/t higher, while soy oil was 60 points lower.

Canola

Canola followed weakness in outside markets to finish with slight losses. The CAD was slightly lower, but the soft tone in vegetable oils prevented a positive close.

Australia

Aussie markets will benefit from a softer dollar, which fell around 1pc.
Barley markets remain all bids and no offers, with continued uncertainty surrounding the Chinese investigation into US sorghum imports.
Sorghum in the north is similar, with prices having moved approximately $5 yesterday.
Given how flat things have been of late, it will be interesting to see how much of the futures and currency move the trade passes on in wheat today.

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