Markets

Daily Market Wire 9 July 2018

Guest Author, July 9, 2018
Higher for grains and oilseeds.
  • CBOT wheat up 9.75c to 515.25c,
  • Kansas wheat up 9.75c to 513c,
  • Corn up 8c to 360.25c,
  • Soybeans up 38.25c to 877.5c,
  • Winnipeg canola up C$6.30 to $511.20,
  • Matif canola down €0.75 to €361.75,
  • Dow Jones up 99.73 to 24456.48,
  • Crude oil up US$1.09 to $73.91 per barrel,
  • AUD up to 0.743c,
  • CAD up to 1.309c (AUDCAD 0.973),
  • EUR up to 1.175c (AUDEUR 0.632).

Wheat

Wheat contracts closed higher on Friday, posting a decent technical close. Implied volatility in September Soft Red Winter went out at 29.6 per cent. European futures were down €1.75 to €185, with a wetter forecast easing buying appetite for now. Weather in the Black Sea region continues to look dry, which will likely encourage risk-premium additions ahead of the USDA’s World Agricultural Supply and Demand Estimates (WASDE) report due out on Thursday. The market is expecting the report to include some large production declines in the European and Australian crops since the June report was released.  If this combines with a large increase in the Commitment of Traders (COT) structure, then wheat appears cheap at current levels.

Corn

Corn found support from beans, but also saw some premium additions thanks to a warmer forecast throughout key growing areas. The next two weeks in corn production is crucial for pollination, and drier and warmer weather could go a long way in reducing yield potentials there. Export sales were below expectations at 672,000 tonnes. If the COT reveals a large increase in shorts, and weather is warm ahead of the WASDE report, we could see some big moves in the corn price.

Soybeans

Soybeans led the charge higher on tariff day, with the US implementing their tariffs as expected, and China responding as expected. It all happened in a uniform fashion, prompting a strong rally as the market realised that all bearish news had been factored in. The market will solve the demand changes by shifting trade flows, which will probably surprise on larger-than-expected demand once the numbers are crunched. We will see the beginning of this reshuffle in this week’s WASDE report, which will factor differing trade flows into its figures. Export sales came in near expectations for the week at 1.01 million tonnes. Soymeal was up $11.70/t, while soy oil was up 45 points. The market is expecting to see additional shorts in corn and beans in the next COT report.

Canola

Canola followed vegoil strength, despite a much stronger local dollar, which finished at three-week highs. Matif futures finished fractions lower, with a stronger Euro and forecast cooler and wetter weather in eastern Europe encouraging bulls to pause for breath.

Australia

Australia had a dry weekend, as the forecast suggested. Cash markets were slightly softer in Victoria, but stable in the north. Export markets held up well last week, particularly in Western Australia, where good rainfall was received last week. That is because we are quite close to export parity, so the trade is comfortable owning whatever the grower is selling at these levels. The eight-day forecast is dry for most cropping regions, which should prompt consumer concerns as the week unfolds.

Source: Lachstock Consulting

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