Markets

Daily market wire 11 May 2018

Lachstock Consulting, May 11, 2018

Overnight futures markets

Lower grains, higher for oilseeds.

 

  • CBOT wheat down-4c to 506.5c,
  • Kansas wheat down -4.5c to 527c,
  • Corn down -0.75c to 402c,
  • Soybean up 5.5c to 1021.25c,
  • Winnipeg Canola up 2.80$C to 533.2$C, and
  • Matif Canola up 1.25€ to 359.25€,
  • The Dow Jones up 196.98 to 24739.53,
  • Crude Oil up 0.260c to $US71.4 per barrel,
  • AUD up to 0.753c,
  • CAD down to 1.276c, (AUDCAD 0.961) and the
  • EUR up to 1.191c (AUDEUR 0.632).

Wheat

Wheat finished lower across all classes, with no immediate threats stemming from global weather or the USDA report. Aussie dryness and wet conditions in the Northern Plains that threaten Spring Wheat plantings are the only perceived global problem in wheat at present. The market is long enough to prevent these threats from prompting any short covering order flow support. Implied vol in July SRW went out at 26.125 per cent. Export sales were well below expectations at 83.4kmt vs expectations of 445kmt. The HRW production came in at 647mbu (17.6mmt) which was at market expectations. The major point of interest came from what the USDA did with Russia’s stocks. They increased 17/18 exports 1mmt to 39.5mmt which lowered the carryout. Then moving into 18/19 ignored the Ag attaché’s figures, with production 2mmt lower at 72mmt and exports up 4.5mmt at 36.5mmt. This lowered next year’s carryout to 5.7mmt, which is below the 5-year average, leaving limited margin for error in 19/20 production. If this export situation eventuates then it would make an argument for price convergence between Russia and US wheat pricing, to secure larger US exports.

 

Corn

Corn finished fractions lower with a high 7 cent range. The USDA called 17/18 US corn ending stocks 47mbu (1.2mmt) above market expectations at 2.182 bbu, while 18/19 ending stocks were 37mbu (1mmt) below at 1.591bbu (42.73 mmt), which is the lowest US carryout since 2013/14. What’s interesting here is the 18/19 outlook is based on lower YOY exports, which seems a little off, given the major yoy production declines in Argentina and Brazil. They left Argy production at 32mmt but brought Brazil’s production down 5mmt to 87mmt (CONAB 89.2). The global figures were a bullish shock with ending stocks coming in at 159.2 (22.8mmt below market expectations), which puts further pressure on US production. Weekly export sales came in below market expectations at 695kmt in old crop and 90kmt in new crop. The corn market is too long for now, despite a bullish balance sheet, with time on the side of production, it remains a buy the dips scenario.

 

Soybeans

Soybeans managed a higher finish but settled 12.5 cents of the session highs, as USDA report volatility clashed with political uncertainty, prompting whippy trade. Export sales in came in below market expectations at 354kmt in old crop and 278 in new crop. Soymeal was up $1.30 per tonne, while soy oil was down 11 points. The USDA brought 17/18 US old crop stocks 11 mb (299kmt) below the markets expectations at 530 mbu. Their new crop stock estimates were 120mbu (3.26mmt) below market expectations, which aided today’s price action. On the global front production cuts in ARgy (-1mmt to 39mmt) were offset by increases in Brazil (+2mmt to 117mmt, in line with Conab).

 

Canola

Canola followed strength in soybeans, in a quiet day that saw two-sided trade. The currency strength softened new crop vs old crop and saw the inverse gain some more ground.

 

Australia

Aussie markets decided that the rain received last week and that forecast for the next 8 days was not enough to prevent production losses. July ASX traded at $315, while Jan 19 ASX traded at $322. Barley followed slowly with prices ranging from $290-$305 track in Victoria. NSW and Qld domestic markets are driving Victoria’s price strength for the moment and should continue, unless we see a monster rain event in the next three weeks.

 

Source: Lachstock Consulting.

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