Wheat continued its rally, inspired by dryness concerns in the Black Sea. Russia’s winter-wheat areas have had the driest April/May in 15 years, and fob offers are becoming hard to find. With increased temperature forecasts for next week, and planting delays in spring wheat, we could see the market trade a sub 72-million-tonne (Mt) crop, which would increase fob and futures premiums. Dryness concerns in eastern Europe and the Baltic is beginning to influence yield estimates there too. Implied volatility in July Soft Red Winter went out at 33 per cent. Export sales came in at 19,400t in old-crop and 250,900t in new-crop. This was better than market expectations, but well below what was required to meet the USDA’s forecast. Weather in Australia and Canada is improving, but Russia is the driver for now, and until its weather prevents production declines, we expect to see more support in futures.
Corn continued its grind lower, with beneficial United States forecasts and weakness in beans contributing to the sour tone. A good chunk of the corn belt is looking to receive another 25-75 millimetres of rain next week, which has prompted some grower selling and long liquidation. Export sales were 20pc higher than expected at 836,000t in old-crop and 418,000t in new-crop. US conditions are leading the bearish charge in corn, but global conditions are declining and June weather doesn’t make the US crop.
Beans were hit again by politics, as well as US weather and lower South American prices. Currency weakness in Brazil continues to put pressure on fob premiums as growers liquidate, prompting hedge pressure to futures markets. US beans are finding no demand anyway, with trade wars scaring away the demand. Weekly export sales came in at 164,000t in old-crop and 34,700t in new-crop, which was 198,000t below market expectations. China has been noted as a buyer of Brazilian beans, regardless of US price relativity. Soymeal was down $6.60/t, while soy oil was 5 points lower.
Winnipeg canola took a big hit, as weakness in beans and a declining technical picture prompted long liquidation that saw futures reach lows not seen since mid-March. Matif futures held up well, with uncertainty over production potential preventing aggressive sellers.
Aussie cash markets remain well supported by consumers that cannot miss the chance to buy the dip, regardless of whether rain forecast for southeastern Australia in coming days eventuates. The eight-day forecast remains positive for South Australia and Victoria. For New South Wales, the area to benefit looks to have shifted south, and volumes do not appear to be large. If this incoming weather system brings what is forecast, it will not be enough to get NSW crops out of trouble, and more will be required before the end of this month to prevent further price support and yield declines.
Source: Lachstock Consulting
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