Agri-commodity markets were relatively quiet over the past day – Paris wheat futures surge to provide the exception.
The US Dollar had a mixed day on Thursday against the other agri-exporter currencies. Suffice to say, not much happened of note. The Australian Dollar was part of that broader pattern. The Aussie is up a quarter cent to trade just below 75¢ this morning.
Grains & Oilseeds
- Wheat futures had a decidedly mixed Thursday. Kansas and Minneapolis were little changed. Chicago was up sharply. Paris prices spiked. European crop estimates are being cut after sustained wet weather across large swathes of northern Europe. Not only is there less grain though, quality declined in those soggy conditions. In the US, the, to some degree, “realignment” of Chicago and Kansas is worth noting. Kansas’s comparative strength of late had us on alert: maybe the harvest hit had been absorbed. The opposite move last night is contrary to that thought.
- ASX East wheat futures were steady on Thursday. January 2017 was unchanged at season lows, 242½$/t. Overnight markets provide little obvious guidance for trading today. Australian wheat prices are largely in line with the global prices too so there is little pressure for a gross adjustment to basis either.
- Corn futures were modestly lower Thursday. The US weather narrative is little changed. Forecasters say hot temperatures will continue in the Midwest today, before a cool change takes hold over the weekend. US export sales data also weighed on the market, coming slightly below what analysts had expected. Argentina’s Agriculture Ministry also revised its crop estimate for the current season up about ~2mmt, to just under 38mmt.
- Oilseed prices were mixed Thursday. Soybean prices lifted a shade, while canola closed a touch lower. Forecasts for largely seasonable Midwestern weather next week continue to weigh on prices. US soybean export sales - stronger than expected - did offer the soy complex some support. With the Argentine soybean crop now all but in the bin, Argentina’s Agriculture Ministry has raised its production estimate for the 2015 season from 58mmt to 58.8mmt.
US cotton futures lifted on Thursday. The US reported a better week of export sales for last week. China also released initial estimates for 2016-17 cotton production following heavy flooding along the Yangtze River Basis earlier this month. Total output is expected to fall to 4.84mmt, a 7% decline on the previous year. Production in flood-affected areas might be down by about a third. The China Cotton Textile Association has urged the government to speed up the sale of its reserves. The Association’s urgings come despite the China’s government selling 1.45mmt of stockpiled cotton already through mid-2016. Daily auction floor prices have risen sharply as mill demand outstrips local supplies. Even so, Chinese import data for June showed that cotton imports were less than half of what they were last year. Government issued quotas remain low and any cotton imported outside those quotas faces heavy tariffs, so the revival in Chinese mill demand has not translated to any significant improvement in US exports.
Sugar futures prices broke free from the sloth of the previous few days to post sharp gains on Thursday. The market could not though stick at still higher prices during the day. We are still inclined to think prices will fall some more. Momentum investors remain heavily long in sugar futures that, because prices are going nowhere, has the exit light flashing. Weather forecasters expect largely dry conditions for next ten days or so in southern Brazil's cane region. The forecast suggests soil moisture along northern edge of that region will remain severely dry. The dry conditions will prompt concern about sugar production there, both this year and next.
NZX WMP futures made solid gains on Thursday despite a sharp fall in the NZ Dollar. Prices have opened strongly higher this morning too.
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