Markets

Daily market wire 9 February 2018

Lachstock Consulting, February 9, 2018

Overnight futures markets

Mixed for grains and stronger for oilseeds

  • CBOT Wheat was down -4.25c to 456.25c,
  • Kansas wheat down -6.5c to 474.5c,
  • corn up 0.5c to 365.75c,
  • Soybean up 4.5c to 998.75c,
  • Winnipeg Canola up 1.10$C to 505.5$C,
  • Matif canola down -0.25€ to 349.75€.
  • The Dow Jones down -558.43 to 24334.92,
  • Crude Oil down -0.799c to $US60.99 per barrel,
  • AUD down to 0.780c,
  • CAD up to 1.259c, (AUDCAD 0.982)
  • EUR up to 1.226c (AUDEUR 0.635).

Wheat

Wheat took a breather after yesterday’s sharp gains.
USDA increased ending stocks by 544,000t by lowering exports. Global stocks were reduced by 1.92 million tonnes (Mt) at 266.1Mt due to larger domestic consumption. Russian exports increased by 1Mt, which was at market expectations.
Weekly US export sales came in at 393,000t vs. market expectations of 350,000t.
The fund position in Hard Red Winter wheat futures is expected at 10-15,000 contracts long now and the technical strength in this market was part of the catalyst for short covering in Sort Red Winter  (SRW) wheat futures yesterday. There is still a reasonable short in SRW that wants out. It will be interesting to see how prices react today. Implied volatility in March SRW went out at 25.45pc.

Corn

Corn finished fractions higher in a surprisingly low-range session, given that we had a USDA and Brazilian government agency, CONAB, report.
Export sales came in at 1.77Mt vs. market expectations of 1.55Mt. CONAB put Brazilian production at 88Mt, which is 10Mt below last year’s figures.
The USDA lowered US ending stocks by 3.1Mt due to increased exports, as well as lowering Argentina’s production 3Mt to 39Mt. The final result of the USDA report was a 3.46mmt drop in ending to stocks at 203.09.
One important factor here is the 7mmt variance between the USDA and CONAB on Brazil’s production. CONAB cited a smaller second crop as their justification for this. If they are correct, then the market should be pricing in a lot more risk, but feels like everyone is on the USDA’s side for now.

Soybeans

Beans recovered after yesterday’s sell off, with CONAB figures coming in well below the markets expectations. Production came in at 111.5Mt vs. market ideas of 112-115Mt. South American weather has not improved, which is driving meal prices higher. On top of this, the markets concerns regarding the US/China trade dispute, which drove things lower yesterday, is easing somewhat, given China’s large demand and limited alternative supply origins.
The USDA increased US ending stocks by 1.63Mt, which was the direct result of a cut in exports. Global stocks finished slightly lower at 98.13Mt.
Export sales in beans came in at 743,000t vs. market ideas of 550,000t. Soymeal finished up US$5.30/t, while oil was down 35 points.

Canola

Like beans, canola recovered yesterday’s losses thanks to outside market strength and some mild weakness in the CAD.
It’s been a big week for canola with Statistics Canada December 31 stocks figures coming in below the markets expectations, as well as outside market strength and some speculation on China canning US bean imports. With lower demand prospects, canola will need to a major fundamental surprise or significant strength in outside markets, so warrant ongoing strength in futures.

 Australia

Aussie markets showed good strength yesterday, with the weaker dollar and stronger futures.
The market returned most of the movement in wheat, while the barley market was mainly bid.
Northern markets continue to fire with sorghum up another A$5/t, while delivered Darling Downs wheat and barley at around $335/t should support southern markets given the increased drawing potential there.

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