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Agri Commodities Update: Kansas contango giro

Kansas wheat futures spreads turned last night to again hint that the trade has managed to kick the US supply can down the road.

Currencies

The US Dollar mostly regained a little lost ground on the other agri-exporter currencies over the past 24 hours.  Even the Brazilian Real stopped rallying.  NZ’s dollar gave up all of yesterday’s one-cent rally.  Australia’s dollar got a lighter touch from the greenback’s strength.  The Aussie drifted down a quarter from the day’s highs to start today where it was yesterday, just above 77¢.

Grains & Oilseeds

  • US wheat futures prices were mixed on Thursday.  Chicago prices fell sharply to give up some overly excited gains from the previous day.  Kansas prices were largely becalmed.  The Kansas contangos did creep a little higher to again give us hope that we have seen the lows for this part of the season.  Paris futures continued to rally as the market continues to mentally markdown EU wheat supply after unhelpful weather.  The EU’s smaller crops are helping to support prices more broadly too.
  • ASX East January wheat futures were marked another half dollar lower on Thursday, to a new season low of 241½$.  And again the market will get little clear direction from global futures and the Aussie Dollar.
  • Corn futures closed lower on Thursday. The USDA reported a strong week of US export sales, but tonight’s WASDE report looms large.  Futures pricing suggests that the market agrees that the US production and carryout forecasts will be larger.  What they probably don’t agree on though is how much larger.  US yields have been the subject of much debate and the range of analyst forecasts is quite wide.  That suggests some will be surprised tonight.  Post-WASDE trading may be more volatile than usual as a result.
  • Soybean futures were little changed on Thursday.  The USDA reported monster US export sales for last week. Over 3mmt of old and new crop ‘beans were sold (up 86% on the previous week), with fresh export sales continuing to clock up this week too.  Not even that though could lift the market out of its pre-WASDE funk.  The prospect of exceptional yields is a reminder that US exports need to be large to absorb the additional US supply.

Cotton

US cotton futures spent much of the day in consolidation, though prices settled a shade higher overall.  US export sales were somewhat disappointing last week.  Forecast rain for the US Southern Plains will continue to replenish soil moisture conditions.  Some early maturing cotton in West Texas though will not welcome the rain.  Forecasters say India and China’s crops are also benefiting Mother Nature’s kinder turn – however a portion of production this season will already have been lost.

Sugar

Sugar futures prices were all but unchanged on Thursday.  The New York October-March spread edged lower again to continue its grind towards carry.  The next spread pairing (March-May) has lost even more ground – Monday it was +80, Thursday it was +49.  We are always inclined to be bearish when we see that kind of action – it does not suggest the market is worried about shortages of sugar.

Dairy

NZX WMP futures were quieter on Thursday.  A handful of contracts posted a mix of small gains and losses. A GDT auction looms next week to give the futures some validation in the physical market.

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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