Overnight futures markets:
- CBOT wheat down 12.75c to 420.5c,
- Kansas wheat down 14c to 426.25c,
- Corn down 2.5c to 346.25c,
- Soybeans up 10.5c to 960.5c,
- Winnipeg canola up C$2.19 to $493,
- Matif canola down €1 to €352.75
- Dow Jones up 200.27 to 25775.01,
- Crude oil up US40c to $64.2 per barrel,
- AUD up to 0.790c,
- CAD down to 1.248c (AUDCAD 0.987),
- EUR up to 1.217c (AUDEUR 0.649).
Wheat was under pressure from the USDA report, which gave the market 1.2 million more wheat acres than they were expecting. The average estimate was for 31.4 million acres, but instead we got 32.6M, which is the lowest they have been since 1909. Hard Red Winter wheat area was reduced to 23.1M acres, while Soft Red Winter (SRW) and white wheat increased to 5.98M and 3.56M acres respectively. US ending stocks came in at 26.9M tonnes, 680,000t above market expectations, due to increased imports and decreased usage. The increase was credited mainly to higher HRW carryout, which is justified, given the carry structures in futures. World ending stocks were fractions lower at 268.02Mt. Australia’s carryout decreased by 3Mt due to revised production figures from last week’s ABS figures. This was offset by a 2Mt increase in Russian production, which they dragged up to 85Mt; exports were lifted to 35Mt. Implied volatility in Mar SRW dropped 3 per cent to 16.33pc. Moving forward, we have weather to contend with, and the major concern there is in the US southern plains, where drought conditions are worsening, although we still have around 50 days before this becomes a serious issue. Commitment of Traders data had SRW at -146,900 vs. -146,300 contracts and HRW at -21,700 vs. -27,700 contracts.
The USDA increased the old-crop corn yield to a new record of 176.6 bushels per acre, but they also lower planted area by 400,000 acres, which softened the blow slightly. Also, USDA lowered its demand estimate by 381,000t. The end result increased final ending stocks to 62.9Mt vs. market ideas of 61.75Mt. Dec 1 corn stocks came in at 317.9Mt, which was higher than expectations due to the larger crop and decreased usage. In South America, USDA left production estimates unchanged, despite the market’s expectations of lower area and yield. This left global ending stocks at 206.57Mt. A private sale of 320,000t was announced to an unknown buyer. COT data came in -253,100 vs. -232,100 contracts.
Soybeans finished stronger, thanks to a friendly report and a stronger bean-oil market. The USDA report suggested a final carryout figure 190,000t below the market’s expectations. Old-crop US production was down 899,000t and the crush was slightly higher, but a 2.1Mt drop in their export forecast offset this. World carryout was higher at 98.57Mt. China’s December bean imports were 6 per cent higher than the same time last year at 9.55Mt. The Commitment of Traders Report (COT) came in at -122,600 vs. -105,000 contracts last week.
Canola was higher, in line with the stronger oilseed complex. Funds have been consistent sellers of Winnipeg and are estimated to be short approximately 20,000 contracts. This is not a record short position, but it is chunky enough to spark a decent rally if the market finds a catalyst in the form of demand. Crush figures were below expectations at 162,000t.
Aussie wheat liquidity is going to suffer post report, with low futures and a currency which is now higher at above 79 US cents. Grower liquidity will get even worst than it’s been. One positive could be that it’s unlikely that Russian prices will decline, given their flat price resilience, which could increase Australia’s flat price competitiveness into Southeast Asia. Barley remains well supported, with Chinese prices now up at $236 CFR to reflect a US$13 rally since the beginning of December. Aussie prices in USD have followed suit.
Source: Lachstock Consulting