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Agri-commodities update: Grains on a rebound

Global wheat prices rebounded on Wednesday – largely because prices got low enough to prompt some investor short covering.

Currencies

The US Dollar had a mixed day on the other agri-exporter currencies on Wednesday.  The outcomes left most of the group within recent ranges against the greenback.  The Australian Dollar was one of those and is trading at about 76¢ this morning.

Grains & Oilseeds

  • US wheat futures bounced on Wednesday to push strongly away from recent lows.  Paris prices also rallied.  Investors hold heavy short position in wheat, so Chicago prices dipping below $4 bushel in the previous session will have spurred some fund short covering.
  • ASX East wheat futures fell on Wednesday.  ASX January was pressured three dollars lower.  The overnight session saw those prices ease another dollar, to close at fresh lows of 242$.  Australian basis had crept higher over the last week or so.  Wednesday’s fall in Aussie prices (coupled with the lift in US markets) has returned Australian wheat to more competitive levels in global terms this morning.
  • Corn futures saw small gains on Wednesday.  The lift was likely prompted by investor short covering after prices hit two year lows in the previous session.  An overnight bounce in energy markets was also helpful context.  The two week weather forecast remains largely benign for US crops.  With the window for weather-related problems rapidly closing, the market will turn its attention to US yield forecasts.  Analysts are generally expecting strong yields, but there are suggestions of variability in prospects across the Midwest, so next week’s USDA update will be closely watched.
  • Oilseed futures had a mixed day.  Soybean prices lifted a shade, with support coming from fresh US export sales to China and other unknown destinations.  Further gains though were capped by the continued non-threatening US weather forecasts.  The market will be tallying the net impact of strong US export demand against a potential bumper US harvest.  We expect the overall picture though will remain somewhat uncertain until we see planting conditions for South American crops later in the year.  Canola futures closed a touch lower, pressured by a higher Canadian Dollar.

Cotton

US cotton futures were a shade higher on Wednesday.  China sold just 47% of cotton reserves offered on Wednesday – another lacklustre result compared to earlier clearance rates that were closer to 100%.  Concerns over heat and dryness remain for US cotton crops.  And, although crops have benefited from recent rainfall, forecasters say India’s Gujarat region is likely to slip back into a drier weather pattern.

Sugar

Sugar futures prices and spreads again finished the day little changed.  A day that can easily be forgotten.  We still think that going nowhere is a problem that will undermine the market.

Dairy

NZX WMP futures rallied on Wednesday as the market absorbed Tuesday night’s very strong GDT auction results.  Prices have opened today on a stronger note too.

Learn more

For a more detailed snapshot of market conditions, or to get the daily market update direct to your inbox daily, visit Commonwealth Bank.

Important Disclosures and analyst certifications regarding subject companies are at www.research.commbank.com.au. This report was originally published, approved and distributed by Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945.

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