Markets

Daily market wire 10 May 2018

Lachstock Consulting, May 10, 2018

Overnight futures markets

Mixed for grains, higher for oilseeds.

  • CBOT wheat down -4c to 510.5c,
  • Kansas wheat down -6.75c to 531.5c,
  • Corn down -0.5c to 402.75c,
  • Soybeans down -4c to 1015.75c,
  • Winnipeg Canola up 1.90$C to 530.5$C, and
  • Matif Canola up 3€ to 352.25€,
  • The Dow Jones up 182.44 to 24542.54,
  • Crude Oil up 0.7c to $US71.21 per barrel,
  • AUD down to 0.745c,
  • CAD down to 1.285c, (AUDCAD 0.958) and the
  • EUR down to 1.185c (AUDEUR 0.629).

Wheat

Wheat was under pressure early and sustained that, with improving global weather forecasts and high wheat relative values, sparking a bearish market tone heading into tonight’s report.

Implied volatility in July Soft Red Winter (SRW) wheat futures went out at 26.5pc.

The US is expecting good weather in the Southern Plains.

Export sales are also part of the fundamental banquet on offer tonight and the market is expecting sales at 170,000t in old crop and 275,000t in new crop.

Russian cash prices appear to be softening as an improved weather forecast combines with export potential improvements in the nearby months. Rains that were initially only forecast for southern Russia look to be increasing their coverage to the northern cropping regions. Russian 12.5pc pro wheat traded for July at US$204/t free on board, which is $10/t below German wheat and $35/t under Hard Red Winter (HRW).

The USDA, in its report to be released tonight, needs to do something with Russia’s carryout which sits at 12Mt as of their last forecast. The US Ag attaché is calling for a Russian crop of 74Mt and exports of 32Mt, which makes for an 18/19 carryout of 9.7Mt, which is slightly above the rolling 5-year average c/o there. But if they increase exports in Russia, then that eats into US wheat export share, increasing US stocks which would be bearish given how expensive US wheat is on a relative basis.

Corn

Corn fractions lower in a tight ranging session, with no-one willing to sell it ahead of tonight’s USDA report. The market is trying to front-run the USDA’s decision-making progress for the report which comes out tonight. The main surprise factors will stem from what they do with bean and corn production in Argentina and Brazil.

Weekly ethanol production figures were up almost 1pc week on week.

In Brazil, there are some improvements to the moisture forecast depending on which model that you look at. This has left the market mixed, awaiting further confirmation.

Soybeans

Soybeans finished with mild losses in a low-ranging session. The handcuffs remain on this market until further clarification can be reached on the US China trade war.

The fundamentals that rallied things earlier this year remain unchanged, Argentina’s production is lower than expected and port issues have hampered export potential even further. On top of this growers there are reluctant sellers, due to local currency volatility. But the view on beans is risk off until the export situation stabilises.

Soymeal finished fractions lower, while soy oil rallied 34 points, thanks to strength in crude oil.

Canola

Canola showed good strength, following sharp increases in veg-oil pricing, which improved crush margins and encouraged a bid.

This occurred, in spite of a stronger local currency.

The inverse is creeping higher again in Winnipeg with July gaining $2 over November in today’s trade.

This is due to market speculation that positive crush margins will encourage nearby demand, while new crop acres increase leaving limited demand for the interim.

Australia

Aussie markets were stronger yesterday, thanks to a low AUD and a negative change to the forecast. It now looks like only some parts of South Western Victoria will receive rain in this forecast, which will leave the rest of the states growing regions dry.

NSW and Qld old crop pricing is supporting southern markets, as available supplies dwindle in the North, increasing the southern drawing arc. New crop prices were well supported yesterday, with wheat and barley prices both shifting closer to last week’s highs.

Source: Lachstock Consulting.

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