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Morning markets: Markets struggle for direction with little hard news

Wheat and soya futures strengthened over Wednesday’s trading, while corn values closed marginally lower. But none were back to the recent peak reached in mid-October.

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Chicago’s December wheat contract closed the day 0.5% higher at $5.20¼/bushel while the Euronext December milling wheat position was unchanged at €181/tonne.

 

Broker BCQI noted that the wheat market seems well balanced between buyers and sellers. While global demand has “surged of late”, US wheat is not benefitting yet as the large global supply - 287.8 million tonnes according to the USDA - keeps a lid on prices.

 

But BCQI analyst Kim Rugel listed some factors affecting global demand and trade flows: India is to incentivise local wheat production, which could reduce its export activity as local prices rise above global values.

 

Iran has announced plans to import 4.0m tonnes of wheat to replace a domestic shortfall after drought reduced its production.

 

While its credit and trade embargo problems mean Russia is its most likely supplier, in turn this could leave an equivalent volume needing to be supplied elsewhere in the world – potentially by the US.

 

“While we still have record world wheat supplies, shifting demand could remove a layer of downside risk and in theory, support the recent trend higher lead by Chicago”, Mr Rugel said.

 

Australia’s wheat futures falling

 

Tobin Gorey of Commonwealth Bank of Australia noted that Australian East wheat futures prices continued to fall - the January 2020 futures lost Aus$3 to close at Aus$344/tonne on Wednesday - with “the cumulative drop now substantial”.

 

While prices might be expected to weaken as the southern Hemisphere cereal harvest approaches, “we are a little sceptical that seasonality means as much when Australia will again have a modest wheat crop”.

 

But with global prices now below those of Australia, and Black Sea and Russian origins firming over the last month, Mr Gorey believes that “Adelaide prices are now low enough to compete in South‑East Asia - that export door opening might easily be enough to relieve most of the seasonal pressure”.

 

CRM Commodities reports that European farmers are attempting to catch up on winter grain plantings for harvest 2020, as well as maize harvesting, both of which have been delayed by wet weather.

 

Welcome rain is also forecast for Argentina’s wheat crop, where 61% of the wheat in the Buenos Aires province is reported to be at the stem extension stage.

 

CBOT December corn closed $0.25 down at $3.873/4/bu Wednesday, with Euronext November corn down €0.50 to €164.25/tonne Mr Gorey notes that Chicago’s December position traded towards the low side of its recent range but added that “the continued resilience in the market at these levels is perhaps its most important feature.

 

Corn ethanol stocks down

 

BCQI reported that weekly ethanol production was up on the prior week and stocks were down over both the last week and year.

 

While his was “modestly supportive”, it says a lack of producer selling is the more supportive factor. But a fall in export sales below the expected pace is a negative factor.

 

Analyst RJ O’Brien said the current US corn harvest is the 5th slowest on record.

 

In Europe, CRM reported an official estimate of 2019 French maize production of 12.3m tonnes, or 2.4% lower than for 2018.

 

This is despite a 5% larger planted area and follows the very high summer temperatures. The USDA had predicted 12.6m tonnes and FranceAgriMer 12.5m tonnes.

 

US soybean futures were $3.35 up at $9.371/4/bu at the close of Wednesday’s trading, with Canada’s ICE November canola position down Can$1.80 to Can$451.8/tonne. In Europe, the Euronext oilseed rape contract closed €1.75 higher at €377.75/tonne.

 

“Sales so far this marketing year have all been above the weekly pace needed to meet USDA estimates and have been topping expectations,” noted BCQI.

 

But “the bean market is a demand market and needs new sales to keep it going up - the 128,000 tonnes in sales announced under daily reporting did little to excite the crowds”.

 

ASF cuts China soy demand 10-15%

 

Richard Feltes at RJ O’Brien reports Chinese government forecasts that China’s demand for soybeans will fall by 10-15% this year compared to 2017, due to African swine fever. It forecasts 2019/20 imports of 84m tonnes from 94m tonnes two years earlier, with private estimates as low as 81m tonnes.


“Trade sources estimate that following yesterday’s buying spree of November cargoes from Brazil, just 7m tonnes of Chinese demand is still open before yet another mammoth Brazilian harvest hits in February, when Brazil’s soybeans are simply much cheaper from February onwards.”

 

“US‑China trade issues remain as unexploded ordnance for these markets,” added Mr Gorey.


CRM said the spread between Nov-19 Euronext rapeseed and CBOT soybeans has recovered from its four-month low of €67/tonne rapeseed over soybeans.

 

It added that a rally in energy prices and Malaysian palm oil reaching a fresh eight-month high were supportive.


There is little hard news on US-China trade discussions, but CRM reported private export flash sales of 128,000 of US soybeans to unknown destinations for 2019/2020. It also relayed that soybean plantings in the Brazilian state of Paraná’s soybean are 45% complete, pointing to a state crop of 19.8m tonnes, 23% up on the previous year.

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