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Agri Commodities Update: Dairy moves the bust

Dairy prices make chunky gains Monday and today while Mondayitis becalmed other agri-markets. 


The US Dollar had a mixed day against the other agri-exporter currencies on Monday in desultory trading.  The Brazilian Real didn’t quite make new highs on the day but it remains in that neighbourhood.  The Australian Dollar has gained a half-cent to start today at about 76½¢.

Grains & Oilseeds

  • Global wheat futures had mixed Monday of modest gains and losses.  A largely dull day other than the Kansas September-December spread edging higher again.  The spread had been stuck at lows for quite some as the futures shapes itself to carry surplus hard red winter wheat.  A second day of gains in the spread could mean that the trade has managed to move the surplus wheat forward in time.  If the surplus can has been kicked sufficiently down the road then we might have seen a low in prices for the year.
  • ASX East January wheat futures were 1½$ higher on Monday.  The market got the expected support from offshore markets on Monday.  There is little guidance from them today though.
  • Corn futures remained stuck in no-man’s land on Monday as the market awaits Friday’s WASDE report.  The amount of US corn rated in good to excellent condition dropped two percentage points last week.  On balance though the crop still remains in good shape, so the upside was limited.
  • Soybean futures lifted on Monday, with canola prices following suit.  The market’s optimism for strong US export demand was bolstered after the USDA reported yet another large sale of ‘beans to China.  The USDA reported that a large proportion of the US soybean crop remains in favourable condition.  Potential supply potential remains large.  Forecasters expect the west of US Midwest to turn a little drier over the next fortnight but not be enough to stir up crop worries.  The south eastern states will see abundant rainfall this week which will be beneficial for late-season crop development.


US cotton futures mostly closed a shade lower on Monday.  The prompt December though fell almost 1% after China confirmed that it would extend its state reserve auctions through to the end of September.  Losses in later dated contracts were far more modest though to suggest the market remains resilient.  India’s Gujarat will receive some needed rain this week.  However the USDA has revised its forecast for Indian cotton production in the 2016/17 down by 1.5m bales (to 27m bales) following a dry start to the season.  US cotton conditions were reported to have declined another two percentage points.  Rainfall is expected to increase in West Texas later this week, but forecasters say that the moisture will arrived too late for those crops that are already in the open boll stage.


Sugar futures prices closed the day with sharpish gains.  New York October finished just off the peaks set about a month ago.  The day was not all bullish though.  Prices did finish off their peaks for the day.  And the October-March spread weakened to close down near recent lows.  Prices and spreads rarely move in opposite directions for long.  The Brazilian Real remains near highs but made no new ground.  The sugar-Real correlation continues for another day.  The correlation though is intermittent – there is no continuous and or mechanistic relationship driving that correlation.  The correlation (in levels) tends to be strongest when, one, the Real is reaching significant new highs or lows and, two, the sugar market is not especially disposed to run against it.  Not a bad description of current circumstances in fact.  These types of correlations though do not make reliable trading rules.  The correlation cannot be ignored while it is running of course but it is more like dune than a mountain – one morning it will be gone.


NZX WMP futures were firm to higher on Monday.  Prices have rallied in early trade today too, with some contracts already over 100US$/t higher.

Learn More

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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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