Global Perspective | US soybean futures increase

US soybean futures increase


Analysis
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US agricultural futures markets have experienced some pressure. The exception being soybean futures which have been trading at three-month highs.

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DONALD Trump’s victory and the possible implementation of his well-publicised policies have seen markets respond to the likelihood of a strong focus on fiscal spending and, as such, price in a 100 per cent rate hike by the Federal Reserve in December. 

Consequently, the US dollar has increased by around 2.5 per cent, detracting from export competiveness for most US commodities. 

In response, US agricultural futures markets have experienced some pressure. 

The exception being soybean futures which have been trading at three-month highs. 

Chicago wheat began the fortnight trading below long-term support of US400 cents a bushel, but found some support when Informa released estimates for winter wheat acreage at 33.8 million, down from last year’s 36.1 million and the lowest acreage since 1919. 

As carry-over stocks remain fairly substantial from a global perspective, the only tangible significance of this estimate in the short term is that US farmers are starting to respond to lower prices.

In Australia, premiums for milling-grade wheat are developing as a result of concerns over quality both domestically and internationally. 

This is particularly evident in the Port Kembla and Newcastle port zones where there is a strong domestic miller presence. 

In WA, noodle wheat demand has picked up with prices rallying around $10 a tonne in response to the realisation of frost damage as harvest begins. 

Despite being compelled lower as the result of the US Department of Agriculture again increasing its yield estimate from 173.4 bushels an acre to 175.3bu/ac, corn has been visibly resistant over the past 10 days. 

Technically the active contract is trading just north of its 50-day moving average. 

Export demand for US corn has helped provide support with a sale of nearly 1.6 million tonnes reported. 

It is evident that strong US exports are offsetting the shortfall that resulted from the drought in Brazil earlier this year. 

Similar to the oilseed complex, South American production will be of importance for corn markets moving into next season. 

The expectation is that stocks will increase substantially between Brazil and Argentina due to higher domestic prices and export taxes which are encouraging a skew towards the crop. 

From a feed perspective in Australia, feed barley seems to be competitive at current levels around the various port zones while malt barley interest is strong in WA, but varying on the east coast due to quality concerns.  

Contrary to their coarse grain counterparts, US soybeans have rallied strongly during the past week, with the nearby contract for 

Chicago Board of Trade (CBOT) soybeans sitting above all its moving averages. 

Global soybean demand remains comparatively very strong, driven by an expansion in global animal protein production and a 6.6 per cent annual increase in crush over the past three years, along with a forecast four to five per cent increase in 2016-17. 

In the short term, the rally in futures has been primarily driven by reported export sales to China. 

It is expected that Chinese imports should increase by 5.5pc year on year for the 2016-17 season and 3.5pc for 2017-18. 

Domestically, canola prices have been fairly reasonable of late and have been favoured as a cash crop coming into harvest.

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