Markets

Daily Market Wire 8 May 2020

Lachstock Consulting, May 8, 2020

Markets rallied, US dollar weakened.

  • Chicago wheat July contract up US5¢/bu to 522.5¢;
  • Kansas wheat July contract up 1.25c to 478.75¢;
  • Minneapolis wheat July contract up 3.25c to 511¢;
  • MATIF wheat September contract up €2 to €188.25/t;
  • Corn July contract up 3.75c/bu to 318¢;
  • Soybeans July contract up 11.75¢/bu to 844.25¢;
  • Winnipeg canola July contract up $C1.80 to $467.20/t;
  • MATIF rapeseed August contract up €3.75 to €374.25/t;
  • Brent crude July contract down US$0.26 per barrel to $29.46
  • Dow Jones index up 211 points to 23876;
  • AUD firmer at $0.6534;
  • CAD firmer at $1.3940;
  • EUR firmer at $1.0846.

Markets

In the wheat pits Chicago settled up 5 usc/bu closing at 522.5usc/bu, Kansas was 1.25 usc/bu higher to settle at 478.75usc/bu, while Minni rallied 3.25 usc/bu to go out at 511usc/bu. Corn gained 3.75 usc/bu to go out at 318usc/bu while Beans were up 11.75 usc/bu to settle at 844.25usc/bu WCE Canola rallied 1.8 CAD/mt closing at 464.2CAD/mt with Matif Canola finishing higher by 3.75 Eur/mt. In outside markets the Dow Jones gained 211.25 points and crude was up 0.35 bbl.

May is the fourth quarter, overtime, bottom of the 9th, whatever you call it in curling. Global weather is the only thing to watch and this year is providing all the twists and turns. Europe was too wet, then too dry then, well, based purely in the last week and the 14-day forecast, pretty good. The story in southern Russia is similar. Vegetation index vs normal shows the impact of the dryness to date but, with some timely rain across the wider belt the market will have to decide if production estimates are justified.

The US and China are still sitting around the “Phase-one” negotiation table. One would imagine things may be a little frosty given the Pres’s bent on COVID finger pointing. Despite the mud slinging, and reflecting just how aggressively the US is pricing, China did buy 686,000t of US corn over the week, a mix of old-crop and new.

The upcoming May USDA report is a biggie. It represents the starting point for the new crop year. The USDA will give the market their first guess at 2020/21 wheat and row crop production which has historically created some decent volatility. Add in the unprecedented impact of a global shut down and anything can happen. Focusing on just two things, ethanol demand erosion and a wheat v corn spread >US$2/bu is enough to get the market excited. Does the US grower throttle corn acres given we are close to breaking $3/bu. That seems unlikely given the US grower had 51pc planted as per last Monday’s update vs 46pc 10yr avg, and/or do we see wholesale wheat feeding reductions given the spread to corn? Or does the USDA take the conservative route and bleed changes in over the year?

Canadian statistical agency, StatsCan, the equivalent of USDA, pegged their wheat acres at 10.2m ha, reflecting a decent jump in winter wheat allocation.

Australia

Back locally, blowing winds swept through parts of SA and Vic with scattered showers pushing through over the day and forecast to continue throughout the weekend. Good conditions continue through NSW by and large. Though it was too wet for some to get machinery back on the paddocks this week, most should be back on over the weekend.

WA remains dry with some coastal showers expected but nothing meaningful and there is still time in planting window.

Reports emerged of some growers through the Qld grain belt waiting for rain before getting going again.

New crop markets seem have to found a level yesterday and some would say a fraction firmer but still little liquidity it seems.

Old crop markets saw bits and pieces trading. Vic wheat delivered markets remained unchanged over the past couple days, but extremely wide bid-offer spreads mostly prevailed. NSW was much the same as Vic, but slightly firmer as liquidity started to dry up and the hangover from significant rains last week started to ease.

Currency began Friday’s lead into the weekend, with a firmer AUD/USD .6504, as it broke through resistance at .6475.

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