10/29/18

Morning Commentary - 10/29/2018

Markets Rally on Follow-Through, Aussie Wheat Estimates

6:30 AM CDT CBOT Prices: Nov soybeans are up 5.75 cents at $8.4075, Dec corn is up 1.75 cents at $3.695 and Dec Chi wheat is up 2.75 cents at $5.08.

Good Morning! Markets rallied overnight in decent volume. The world wheat trade is digesting the change in world fob lineups, with the US to garner more non-traditional business moving forward. Even French & German wheat markets are competitive for major import demand in the first quarter of 2019. EU wheat futures are steady this AM.

Also of note, ABARES has lowered its Aussie wheat crop estimate to 16.6 MMTs, vs. the USDA’s 18.5. This implies an exportable surplus of no more than 10 MMTs, vs. USDA’s 13.

Exporters in Western Australia face better profitability shipping wheat to East Coast feeders/millers, and so even 10 MMTs may be too high.

Jair Bolsonaro was elected President of Brazil over the weekend. The real is fractionally higher this AM. Polls for weeks have indicated Bolsonaro would be the likely victor, and so the results aren’t surprising. The issue next for Brazil is how effective Bolsonaro will be at pushing through new legislation. Bolsnaro’s administration appears favorable to agriculture & exports.

Other macro markets are mixed. The US dollar is up slightly, spot WTI crude is unchanged, while RBOB gasoline is slightly higher. Malaysian palm oil futures opened the week up 30-40 ringgits. Down futures are up 140 points, with equity markets looking to heal chart patterns after recent losses.

The EU/Black Sea forecast is warmer and drier still, with a strong high pressure Ridge likely to stay anchored aloft Eastern Ukraine and Southern Russia over the next 10 days – and perhaps beyond. Little/no rainfall is forecast east of France through the period. Maximum high temps will continue in the 50s across E Europe and the Black Sea, which is some 6-20 degrees above normal. Additional soil moisture loss lies in the offing.

And the EU & GFS models are in good agreement on the US pattern, which turns a bit wetter moving forward. Heavy rainfall will impact the Delta/Southeast and Eastern Midwest during the second half of the week. Follow up showers are offered to MO, IA, WI and IL in the 6-10 day period. Lite snow inches southward into the Dakotas and MN by Nov 8th

Wheat futures found another bottom last week, and Egypt’s purchase of US wheat suggests the US will compete for a host of tenders over the next 4-5 months. Corn/beans will be stable into the USDA’s November reports.

10-Day EU/Black Sea Precip:

 

 

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