Global wheat futures took a tumble yesterday on the back of improved supply forecasts, while sugar prices continued to surge.
The US Dollar strengthened a shade on Tuesday against the other agri-exporter currencies. The greenback’s gains don’t take it anywhere near novel levels but there is some relief for local currency prices in the move. The Australian Dollar followed that global pattern, falling as the night progressed to start today just below 76.25c.
Grains & Oilseeds
- Global wheat futures prices tumbled on Tuesday. The market continues to react to news of further expected increases in supply. Canada’s official statistics agency last night forecast the country’s wheat crop at 30.5 million tonnes. Analysts were expecting a number around that level but the confirmation clearly worried the market. The crop is large: Canada’s wheat production has only exceeded the thirty million tonne level one other time in the past quarter century. Minneapolis spring wheat futures most keenly felt the impact but the issue resounded in US winter wheat futures to also drag them lower. Canada’s volumes will be large but there is a quality dimension to the situation. Not all the wheat will be high quality. So, as in dealing with the US winter wheat surplus, the resolution looks to be in using the wheat for feed. We suspect that is a viable solution but we are nonetheless going to check just how much wheat is now being notionally allocated to feed. Australia’s burgeoning crop might yet add to these pressures (see next segment).
- ASX East January wheat futures were a shade higher on Tuesday, to close at 235$. The modest weakness in the Aussie Dollar overnight will have been offset by sharper falls in global wheat markets. We may see some more pressure on Australian wheat prices as a result today. The Australian crop outlook is also having an impact. Our travels, northern NSW last week and WA this week, suggest Australia is looking at bumper crops in the 2016 season. Growers along sections of the rainbow coast east of Albany are worried about too much rain, a sign that growers to the north are doing rather well.
- Soybean futures closed a shade weaker on Tuesday. Trading was kept fairly range bound as the market awaits the full results of the Pro Farmer crop tour. Canola futures finished a shade higher Tuesday after Statistics Canada released estimates for Canadian 2016-17 canola production. At 17mmt the forecast was at the low end of analysts' expectations.
- Corn futures were sharply lower on Wednesday. The USDA's lift to official US corn conditions (up 1%) continued to weigh on the market. However the annual Pro Farmer Midwestern crop tour kicked off earlier this week. Crop scouts have described yields from the eastern and western legs of the tour so far as 'inconsistent'. The wide range, some say, does not give the impression of a record 175.1bpa US corn yield. Results from the remainder of the tour will be closely watched.
Cotton futures were a shade higher on Tuesday. The market is still drawing support from Monday's one percentage point drop in US crop conditions. Forecasters say though that West Texas will continue to see frequent (albeit erratic) showers this week to improve soil moisture conditions.
Sugar futures prices continued to surge in Tuesday. New York October finished not too far off the highs set in mid-August (20.92). For us, the more eye-catching part of the day was again the rally in the October-March spread. The character of the rally is changing too. Trading volumes are still subdued but they have nonetheless stepped up from where they were. And, while spurts of investor buying are still taking the market higher, the trading in between in more than just white space. The momentum has again shifted up a little to veer clear of immediate danger for that huge investor long position.
NZX WMP futures were unchanged Tuesday. A very quiet start to the week compared to last week's price action.
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