Overnight futures markets
- CBOT Wheat down -14.75c to 511.5c,
- Kansas wheat down -16.25c to 539.5c,
- Corn down -5.5c to 400.75c,
- Soybean down -25.25c to 1011.5c,
- Winnipeg Canola down -2.20$C to 524.9$C, and
- Matif Canola down -0.25€ to 354.5€,
- The Dow Jones up 94.81 to 24357.32,
- Crude Oil up 0.28c to $US70 per barrel,
- AUD down to 0.751c,
- CAD up to 1.287c, (AUDCAD 0.967) and the
- EUR down to 1.192c (AUDEUR 0.630).
Wheat sold off, with easing global weather concerns and US/Mexican imports of French and Russian wheat highlighting how overvalued the US is, which has July wheat poised to test the gap it formed Monday week ago, at 499-500.
Implied volatility in July Soft Red Winter (SRW) wheat futures went out at 28.75pc.
The weather issues that worried the market last week are easing, with cool conditions in the Black Sea and potential for some rain in southern Brazil. With everyone on the same side, it’s difficult to uncover new buyers when sentiment shifts.
After the close, crop conditions had wheat up slightly, which the market was expecting. The good to excellent rating came in at 34% vs 33% last week, with the winter wheat crop 33% headed vs an average of 41%. Spring wheat planting progress came in slightly below the markets expectations at 30% vs. ideas of 35% and an average of 51%. This could highlight some price support in spring wheat, given that it has lost a lot of relative value in recent times.
The Saudi tender for wheat came in at an average of US$246.25/t cost and freight (cnf) for 365,000t to Jeddah in August and $250.98/t cnf for 180,000t shipped to Dammam. This too, highlights how overpriced the US is with all this business expected to be replaced out of Europe.
Corn couldn’t overcome the pressure from weakness in beans and wheat, selling off on speculation of improved planting progress and a small glimmer of hope for improved rainfall in Brazil in one of the longer-term forecasts.
Corn did hold up the best though, as the upcoming WASDE report has the potential to highlight the tightest balance sheet we have seen for some time in corn.
After the close corn plantings came in at 39pc vs. market expectations of 35pc and last year’s figures of 45pc.
Sorghum planting is 29pc completed, which is on the average.
Soybeans sold off as larger acreage potential in the US, combined with ineffective trade negotiations between the US and China that continue to yield no solutions. The political risk factor is discouraging soybean demand which is encouraging some demand changes, with China planning to increase their import quota for Indonesian palm oil by 500,000t.
A stronger USD also devalued currency in Brazil, which encouraged a decent grower selling program for beans.
Veg oils are not the only markets affected by politics at the moment. Crude oil reached new highs, not seen since 2014, stemming from speculation that the US will exit the Iran nuclear deal, which would have flow on effects to trade and prevent OPEC’s third largest oil producer from continuing to supply.
Plantings have come in at 15pc vs. an average of 13pc at this time of year. Soymeal was down US$11.20/t, while soy oil was up 11 points.
Canola sold off, following weakness in beans and the prospects for improved new crop weather.
The market was suspicious of Statscan’s lower acres from the moment the report was published, and as planting weather improves, they are favouring short positions which is seeing Winnipeg head back towards better relative value levels to Matif.
Aussie cash markets were quiet yesterday, with the market re-adjusting to weaker futures and some positive rainfall.
The 8-day forecast is sustaining for Victoria, although the longer-term forecast appears to be reasonably dry. The rains we are forecast to receive buy time in the short term. But we still need above average May and June rainfall to prevent yield penalties. For that reason, we do not expect to see a huge amount of pressure in old crop values, as grower selling will not be a huge feature.
Source: Lachstock Consulting.