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Morning Markets: Futures steady as volatility eases

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Consolidation is the word most used by traders to describe yesterday’s session, with gains in wheat after the first evidence of Russia’s wheat export tax affecting tenders, and in soybeans following higher than expected US crush figures. All three commodities were trading higher early Wednesday, with wheat futures back above $6/bushel.

 

The funds were net buyers of 3,000 lots of wheat; 1,000 lots of corn; and 11,000 lots of soybeans on Tuesday. Analyst Agritel observed that physical market activity is slowing towards the end of the calendar year, with markets consolidating after their recent volatility.

 

The March Chicago wheat futures gained 1c over Tuesday’s trading to close at $5.99¾/bushel, while early Wednesday’s trading saw a rise to $6.05½ /bu.

 

The Euronext March futures gained €1/tonne at €207.25/tonne. The July position was also up with no change for September, but the Dec 21 and March 22 contracts fell slightly.

 

Egypt’s tender for 235,000 tonnes of wheat was met by 120,000 of Romanian origin and 115,000 tonnes from the Ukraine. This means Russian offers were not competitive after the Ministry of Agriculture’s introduction of export taxes on Monday – the first time Russia has missed out in the last 12 tenders.

 

Russian logistics at capacity

 

While the Russian export tax is expected to accelerate sales volumes before February 15th, Agritel noted that grain handling logistics there are already running at full speed, so the effect on additional volumes may be limited. The FOB and CIF wheat prices in Russia are now at their highest since the beginning of the season. CRM Commodities added that Russian exporters are unwilling currently to take the risk of offers amid export tax price implications.

 

Meanwhile, December’s MARS on European weather forecast widespread minor to moderate frost-kill events in the Volga okrug region of European Russia. CRM noted that the balance between an increased Russian winter grain area and poor conditions for winter cereals “is continuing to produce a wide variation of early production estimates”.

 

“Wheat futures prices gained modestly on Tuesday,” summarised Commonwealth Bank of Australia’s Tobin Gorey. “A much quieter day after the swings of the previous few days sees prices consolidate at somewhat higher levels after Russia’s export tax announcement.”

 

The March CBOT corn contract opened yesterday at $4.21½/bu to close at $4.24¾/bu, with a further rise to $4.27¼/bu as markets opened today.

 

Europe’s January 21 contract gained €1.50/tonne to close at €190/tonne. Corn values largely followed wheat and soybeans.

 

Quiet session for corn

 

“There was little for corn to hang its hat on today,” noted Kim Rugel at Benson Quinn. “Corn traded lower all session but eked out a higher close on spill over from beans pushing to new highs on the close.”

 

US ethanol production figures on Wednesday may provide more direction – the trade predicts lower production and higher stocks as COVID-19 restrictions limit demand for roadfuels over the holidays.

 

Mr Gorey described a quiet corn trade finishing a shade higher on Tuesday. “Weather forecasters are again forecasting just enough rain in Brazil and Argentina to prevent worry crystallising into lower crop forecasts.”

The January soybean futures position in Chicago rose 1¾ cents on Tuesday to close at $11.84½/bu and had reached $11.90/bu in early Wednesday trades.

 

The Paris Oilseed Rape contract gained €2/tonne to finish Tuesday at €407.25/tonne, and Canadian canola gained 0.8% to Can$594/tonne, a season high.

 

NOPA crush third highest

 

Yesterday’s NOPA monthly crushing report showed higher activity for the month of November 2020 than expected. The 181.018 million bushels is the third best performance on record and up 9.8% year-on-year. This factor, added to uncertainty over the forthcoming Brazilian soybean harvest, supported values.

 

Ms Rugel reported that funds appear to be getting back into soybeans “after being slow liquidators over the past two months - Jan beans closed at new high for the month. The implied total crush is 192.4 million bushels, making for not only record exports in the first quarter but record crush usage. USDA is forecasting year-on-year increase in crush at 3.4%.”

 

Rising soybean futures also saw increases for soymeal and oil. “Meal closed right at the 20-day resistance, while soyoil blew through its Nov 20 high to close at a new contract high,” said Ms Rugel.

 

Reports that Argentine oilseed workers are to continue their strike over wages is also supportive to values - picketers are blocking crush plants around the Rosario port, which handles some 80% of Argentine agricultural exports.

 

CRM Commodities warns that South American weather forecasts over the next fortnight are short of rainfall. It also cites media reports of a 15% export tariff on Russian sunflower oil.

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