CASH MARKET WRAP: China optimism firms price despite holiday

Wheat 

A quiet week for the physical trade had little in the way of new fundamentals to drive prices, although a rally in US futures and the prospect of Turkey’s TMO returning for 550,000 mt of milling wheat late this month provided some support.

The Black Sea is at a standstill, with Russia out of the office for its New Year break and Ukraine only slowly starting to return to work.

Russian 12.5% was indicated around $220/mt FOB for January loading, while a bid for February came in on Friday at $222/mt.

Across the EU there was difficulty ascertaining levels as sellers were unwilling to commit to new positions – with just one cargo of Romanian 12.5% heard offered for February loading at $222/mt FOB Constanta.

Australian wheat is not pricing competitively, with nearby levels for APW now pushing $263/mt FOB Kwinana as the extent of this year’s drought damage becomes fully apparent.

But in Argentina, levels for 12% remained around $207/mt FOB Up River despite persistent uncertainty around export policy and the size of this year’s exportable surplus.

Corn 

Corn prices surfed higher over the holiday period, with support from across the agriculture complex bringing fresh support to CBOT futures to deliver some of the highest corn prices since August.

While Brazil and Argentina remained quiet, the US Gulf and Ukraine should have had a clearer run at global demand, but evidence on end user buying remained scant despite surging pig prices in Vietnam and firm feed wheat prices globally.

That should have sparked some buying for corn as an alternative feed, but the end-of-year gloom kept activity in check.

Prices were broadly-stable, but the US Gulf showed greater competitiveness, as the complex ended the week at $177.75/mt, up just 50 cents and equating to a 60 cent premium to the March contract.

Brazil continued to see domestic prices spike as supply tightens on good demand and strong exports, lifting FOB Santos prices to a $11/mt premium to FOB US Gulf, but the imminence of Argentina’s new crop has stopped the Up River hub from drifting out of contention.

Soybeans 

While new year holidays largely stymied activity in the soybean cash markets, news that the US and China plan to sign the phase one trade deal on January 15 coupled with buoyant soyoil prices lifted the futures market this week.

Soybean futures hit a 10-week high on Thursday with the March contract reaching $9.61/bu, providing support to cash values in the absence of trading activity. 

For soybeans loading out of the port of Santos for February on a FOB basis, prices rose to $373.75/mt by Thursday, up $6.25/mt from Friday.

And in the US Gulf, prices for February shipment hit $373.25/mt, up $5.75/mt.

Crush margins in producer countries also hit at least six-month highs, with Brazilian margins soaring to $40.25/mt on Thursday, the highest level since Agricensus introduced the assessment in August 2018. 

This was due to a spike in soyoil prices which continued to rise amid falling palm oil supplies. 

But demand from Chinese crushers for soybeans was lacklustre despite improving domestic margins for March onwards.