Currency: Dollar jumps
The Australian dollar jumped one per cent overnight to US90.41 cents - the highest level in a month.
The US dollar recovered modest losses and closed unchanged.
Grains: Mixed bag for US markets
CBOT wheat (March 14) rose another 5.5c (0.9pc) to US590.25c/bu, the strongest close in over a month, although the market does appear to be having a short-term struggle to push above current levels.
CBOT corn fell another 1.5c to US441.5c/bu overnight, continuing its short-term trend of underperformance versus wheat.
ASX grain markets were quiet yesterday however bids were generally firmer, despite the strong Australian dollar and forecast rains.
The eight-day rainfall outlook has improved for South Australia, Victoria and NSW, however key regions in Queensland appear set for disappointing totals.
Between 25 and 50 millimetres of rain is forecast for virtually all of NSW over the coming week, with some regions set for heavier falls.
The forecast rainfall is a step in the right direction for graziers and summer crop producers alike, but one rain event (if it eventuates) does not fix a drought.
For central Qld the forecast is more disappointing with just 0-10mm on the radar.
As a result the drought will continue to intensify in Qld.
Yesterday’s ABARES Crop Report included an upgrade to WA and national winter crop production but an expected downgrade to summer crop production prospects.
The sorghum crop has been downgraded from 1.6 million tonnes to just 1.3mt, down from 2.0mt last year.
This would be Australia’s smallest sorghum crop since the drought-affected 2006/07 crop.
Oilseeds: Canola futures hit fresh contract low
CBOT soybeans (March 2014) rose 9.25c to US1334.75c/bu overnight.
However soybean prices continue to face stiff near-term resistance around US1340c/bu.
Canadian canola futures slumped to fresh contract lows overnight with losses of C$5-6/t across the curve.
Cotton: Futures surge higher
ICE cotton (March 2014) recovered initial losses
before surging higher overnight, closing up 130 points at US89.20c/lb.
The stronger performance last night came on the back of Monday’s bearish reversal and resulted in prices closing at their strongest level since August 2013.
More importantly, last night’s bullish performance came on the back of the USDA’s bearish global supply and demand outlook which was released Monday.
Last night’s stronger performance was in part attributed to ABARES downgraded Australian cotton production forecast – 940,000t vs the Dec estimate of 975,000t – however this estimate remains above is above Cotton Australia’s prediction that output could fall below 4 million bales (908,000t).
ICE Sugar (USc/lb)
Sugar: Prices fall sharply
ICE raw sugar (March 2014) finished 11 points softer at US15.49c/lb while the stronger AUD/USD pushed values down by A$8-9/t in AUD terms. Traders have refocussed on the bearish global sugar balance sheet (supplies are expected to outpace demand for a fifth straight year in 2014/15) following last week’s short covering bounce.
In addition, bids fell away after forecasters said Brazil’s key cane areas may see a return of rains from Feb 20.
However there is still much debate about the potential negative impact that the dry, hot weather has already had on Brazilian centre-south sugarcane production prospects.
Newswires reported that India’s government has once again deferred a decision relating to sugar export subsidies.
Luke Mathews is the Commonwealth Bank's agribusiness commodities analyst.
DISCLAIMER: The information contained in this report is made available for persons who are sophisticated investors or professional investors (as those terms are defined by section 708(8) or (10) and (11) of the Corporations Act 2001 (Cth)).