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last release: February 2019

Futures Markets

Jan 2019
Average

% Change

M/M

Y/Y

Wheat

190

 -0.2

+19.5

Maize

149

 +0.6

+7.4

Rice

232

-0.3

 -12.0

Soybeans

334

+1.0

-6.5

Source: CME - USD per tonne

Futures Prices
Prices for wheat, maize, soybeans and rice traded in a narrow range since the start of 2019. Despite record projected ending stocks, soybean prices found some support from deteriorating crop prospects in Brazil and reports that China had imported about 5 million tonnes of US soybeans during January, ending its prolonged absence from the US market. Wheat prices mostly held their levels as US values converged on other origins, prompting analysts to reaffirm a rise y/y in US exports after five years of successive declines. The month-long US government shutdown, which suspended the publication of key USDA reports, such as the World Supply and Demand Estimates, Export Commitments and Grain Transportation, purportedly contributed to lackluster and thinly traded markets. Exogenous markets were mixed: West Texas Intermediate crude oil prices which had plummeted below USD 43/barrel in December, staged a recovery in January to above USD 52/barrel and possibly helped to underpin grain values. The USD index, however, traded in a narrow range producing negligible effects on commodity prices. Reflecting their respective balance sheets y/y, wheat and maize were higher by 19.5 and 7.4 percent, while soybeans and rice were lower by 6.5 and 12 percent.

Volumes and volatility
Trade volumes for wheat and maize rose 23 and 31 percent respectively m/m, but fell for soybeans by 25 percent, while volumes for all three commodities were lower 29, 8 and 18 respectively y/y. Implied volatility and historical volatility remained at relatively low levels m/m for all three commodities. Implied volatility was slightly higher for all three commodities y/y, while historical volatility, with the exception of wheat, was also moderately higher y/y.

Basis levels and transport
Domestic basis levels remained weak m/m for maize and soybeans, as the market was slow to absorb bumper harvests for the two commodities. In Illinois, the interior bids to local elevators were quoted at minus USD 11 per tonne for maize and minus USD 21 per tonne for soybeans, each under the respective March futures prices. In Iowa, the bids were minus USD 14 for maize and minus USD 34 for soybeans (under the respective futures). In soft red wheat, bids for delivery to northern mills were quoted at slightly below March futures prices. Gulf export delivery basis levels for maize, soybeans and wheat were all firmer m/m, at USD 20, USD 9, and USD 30 (per tonne premium over respective March futures). With the resumption of Chinese buying, US FOB vessel soybean values, which traded at USD 90 discount to FOB Paranagua, Brazil during October 2018, reverted to equal levels with Paranagua values, with both origins quoted at around USD 350 per tonne.

Forward curves
Forward curves exhibited negligible changes m/m, remaining in contango configurations (upward sloping). The absence of new data, including updates on supply and demand balances as a result of the US government shutdown, was partly responsible for this lack of movement.