Headlines:
- Tumbling dollar lifts grain prices
Wheat prices in Chicago rallied as a weaker dollar improved export prospects, and corn and soybean futures managed to finish the day up as well, after a day of choppy trading. Early in the session, Paul Georgy at Allendale saw markets “waiting for the next move out of Washington”. And that proved to some more rhetoric suggesting devaluation of the dollar. US president Donald Trump noted the hit to US drugs companies from the recent strength of the dollar, which he ascribed to devaluation by other countries. And separately top trade US adviser, Peter Navarro, told the Financial Times that Germany is gaining advantages against the US thanks to a “grossly undervalued” euro. The dollar was down some 0.8% at a basket of world currencies, matching two-and-half-month lows.
- Canada’s 2017 wheat output to stay high – canola crop to challenge record
Canada’s wheat production will remain elevated this year, while canola production will come within an ace of a record high – yet still leave the country with only “pipeline supplies” of the oilseed, officials said. Canada’s farm ministry, AAFC, in its first forecasts for 2017-18, estimated the country’s wheat harvest at 29.1m tonnes – a drop of 2.6m tonnes year on year but a figure which would nonetheless rank as the fourth biggest in 20 years. The harvest of durum wheat, the type used to make pasta, will plunge by 25% to 5.8m tonnes as the impact of a 15% drop in area, “due to large carry-in stocks… is compounded by a return to trend yields” from the record results achieved in 2016.
Summary:
Corn and Soybeans were slightly up to today rising 1.75 and 1.50 respectively. Wheat futures did pretty well gaining 6.50 (about 1.6%). The Lunar New Year celebration in China will continue all week long and has made for a lower volume across the board. Some would say that bargain hunters were cautiously out and about but the move particularly in Beans yesterday may have been a bit over blown. As we mentioned previously, the big decline yesterday was possibly a shake down of running stops that allowed smart money to buy at the lows only to turn around and take some quick profits today.
The improving weather in South America seemingly was not a factor today even after it was touted as the rational for the decline yesterday. The trade does continue to have concern over the recent policy moves by the Trump administration regarding the possibility of reduced demand. Speculating ahead of time about what may or may not happen is simply posturing and it would be more prudent to allow the price action and money flow to be the true indicator of possible futures moves.
The USD took a big hit today breaking key support at 100.16 and making a intraday low of 99.43. The perceived weakness in the USD was perhaps a help to Wheat in making it more competitive on the global space. If the USD continues to sour, Wheat stands a reasonable chance of continuing to advance.
