Cash market wrap: Futures collapse post-Wasde update
Our weekly recap of the main movements in global cash markets after the World Agricultural Supply and Demand Estimates (Wasde) May report.
This article was first published on Agricensus.com on 14 May 2021
Wheat prices were mixed in the cash market over the week because of falling futures, a raft of holidays, big data releases and a lack of buy-side interest that left many sellers stepping back and taking stock.
With prices still elevated, tenders were thin over the week, with Japan booking 122,180 mt of milling wheat for July, South Korea booking 60,000 mt of feed wheat for July, Indonesia apparently passing on a deal for 180,000 mt of July-August feed wheat and Bangladesh still working through last week’s offers.
At origin, Russian 12.5% was up $2 at $279/mt, with Balkan 12% down $4 at $274/mt and Ukrainian 11.5% up $1 at $274/mt.
French 11.5% slid, with Matif priced $7 lower at $287/mt, while tumbling US futures left HRW 11% in the Gulf nominally some $30 below last week’s level at $292/mt.
After a substantial run-up in corn prices since mid-April, fears of a logistics issue hitting US export firepower tripped off a run on futures that wiped out virtually all of May’s gains in one 24-hour frenzy.
Front-month contracts had soared into $7/bu on a combination of South American production fears and a sizeable US export program before cracks appeared in a bridge spanning the Mississippi, prompting US Coast Guards to shut the key artery.
Futures responded on Thursday with an astonishing $0.40/bu plunge to hit the limits across six contracts stretching out to July 2022, augmenting earlier losses that came on the back of a bearish Wasde report.
The net volatility meant that cash markets were quiet, although the price falls showed signs of tempting out buyers in Asia’s destination markets - Korea’s delivered price shed 3% on Thursday to $336.25/mt, the lowest in a week.
At origin, Argentina retained its crown as most competitive, although there were signs that Ukraine’s pricing and preferential freight position was securing demand into North African and Middle Eastern markets.
That provided support to local prices, driving values higher and widening the difference between Argentina and Ukraine to almost $40/mt from just below $10/mt at the start of the week. Because the assessment time was before the CBOT move, however, Ukrainian corn prices lagged behind Thursday’s big changes.
The Up River complex shed more than 7% of its value over the week to end at $263.75/mt, equating to a seven-cent discount to the July futures contract.
Basis premiums in the Brazilian cash market plunged further while CBOT futures soared during most of the week and did not enjoy any considerable upside once futures fell sharply on Thursday.
Spot sales in the Paranaguá paper market for June delivery dropped 21 c/bu on the week to -48 c/bu to July futures, with flat prices nudging $7.25/mt lower to $567/mt.
Premiums and flat prices varied accordingly in the Brazilian cargo market, with spot sales assessed at 38 c/bu on the July contract, equating to $570.75/mt.
In neighboring Argentina, spot cargoes edged $7.00/mt lower on the week on a flat price basis to $558.50/mt while premiums for June delivery were down by 20 c/bu to July futures, to be assessed at -71 c/bu.
Finally, Brazilian soybean premiums on a cfr China basis fell less intensely than at origin markets and were down by 16 c/bu on the week at $1.15/bu, with flat prices edging up to $632.25/mt, an increase of $3.50/mt higher.