Markets

Daily Market Wire 8 June 2022

Lachstock Consulting, June 8, 2022

Wheat markets gained between 3pc and 5pc. French rapeseed firmed 3pc, corn 2pc.

  • Chicago wheat July contract up US53 cents per bushel to 1093c/bu;
  • Kansas wheat July contract up 49c/bu to 1170c/bu;
  • Minneapolis wheat July up 38.75c/bu to 1230.5c/bu;
  • MATIF wheat September contract up €19.25/t to €397.50/t;
  • Black Sea wheat July contract up $14.50/t to $413.50/t;
  • Corn July contract up 15.5c/bu to 742.5c/bu;
  • Soybeans July contract up 1.5c/bu to 1699.25c/bu;
  • Winnipeg canola November 2022 contract up C$3.30/t at $1042.60/t;
  • MATIF rapeseed November 2022 contract up €28.50/t to €799.25/t;
  • ASX July 2022 wheat contract up A11.50/t to $455/t;
  • ASX Jan 2023 wheat contract up $11/t to $464/t;
  • AUD dollar weaker to US$0.719.

International

The Ukraine export news merry-go-round continues. Wheat markets found selling based on the idea that the Ukraine will find a way to export grain. The sceptic in me finds this a hard one to swallow for a bunch of reasons. But maybe this isn’t the debate. My focus continues to be on the details such as, who gets paid if Russia and Turkey strike a deal is that simply an indication that it will be stolen grain? But, maybe it is simply a matter of whether the 10Mt wheat in the USDA balance sheet will find a way into the export corridor with all the other details meaningless from a balance sheet perspective. Not necessarily an easier debate but it is one that seems more plausible. Reports circulated that a “stolen” Ukraine cargo was unloaded in Turkey probably adds some fuel to the fire. Back to my details matter argument. Turkey is a massive flour producer, of which it exports a bunch to Europe. Let us assume they find a way to keep taking Ukrainian wheat, paying the Russians but selling flour to Europe. How does that fit re sanctions and subsequent repercussions?

Ultimately, wheat markets are about relative value. US futures are often over shooting either side based on flow but, at some point, if you are the cheapest grain in town your balance sheet reacts. Oddly, SRW is now pricing itself into the mix globally yet capital flow is king. As a consumer, the risk on paying the number now only to see a corridor open up and global values fall is a meaningful risk. Is this forcing the world market to move even more to hand to mouth? The Asian flour miller has had a rough few years. Waiting for the opportunity to buy cheap Russian wheat was a strategy many still haven’t caught up from. Looking forward to new crop, the Aussie trade is taking calls from the Asian end user but, without slots it’s a pretty unattractive risk/reward profile. Additionally, examples like the Philippines moving tariff rates to encourage more corn, make the discussion even more cloudy.

Rumours that China have bought 1Mt of US corn have added to the bid side on futures.

Australia

Markets remained sluggish yesterday. Current crop wheat markets gained best-case $5/t across the board. Barley also firmed a fraction but yet again the bids and offers remained wide and liquidity was thin. New crop wheat markets were largely unchanged while new crop canola bids put on $20-30/t.

Viterra released its latest monthly receivals report taking in 14,100t of grain from 2nd May to 5th June. With majority of the deliveries from growers being lentils, wheat and barley and 12,000t of it was taken direct to Viterra port terminals.

The RBA raised the cash rate from 0.35pc to 0.85pc, the largest increase in 22 years and has flagged that inflation would peak higher than the 6 forecast in May. Westpac is the first bank to respond saying it will pass on the full 50bp rate rise.

BOM released its latest Climate Driver Update yesterday flagging that the 2021-22 La Nina event is slowly weakening in the tropical Pacific versus two weeks ago. We will see warmer than average sea surface temperatures around much of Australia which still favours average to above average winter rainfall for Eastern Australia.

 

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