The United Kingdom voted and the markets reacted. If you are a political or economics junkie, it was must-watch coverage of the BREXIT vote night. United Kingdom voters decided by a slight majority to leave the European Union. As one would expect, with “leave” or “stay”, the markets would react.
The Pound Sterling rocked lower through the night in England dropping to levels not seen since 1985. In the commodity markets, concern and uncertainty was the theme on Twitter and financial websites. Here a collection of some of the immediate thoughts this morning from around the world.
— Gavin Maguire (@RtrsAgAnalyst) June 24, 2016
Daniel Flynn of The PRICE Futures Group on Barchart wrote in his morning report:
On the Grain front the complex is no different from other tangible commodities as we see a flight to quality in Precious Metals, Interest Rates and U.S. dollar while the British Pound and Euro- Currency are getting shellacked as trade fears on the economic future is uncertain as we trade on fears and initially overreact. In the overnight electronic session the July Corn is currently trading at 380 which is 7 ¼ cents lower. The trading range has been 390 to 376¾. The weather market we have been talking about has taken a back seat as whatever crop we grow the main concern is exports and trade.
If Great Britain leaves the EU this will change the commodity markets for years ahead. Not a ripple effect but an avalanche to tangibles.
— Jim_Byrne (@Byrne_Invest) June 24, 2016
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— Bloomberg (@business) June 24, 2016
“The agricultural markets have been caught in the storm on Brexit,” said Luke Mathews, senior risk management consultant at FCStone Australia.
“The macro-economic environment is going to be the key driver for all markets including agriculture for a while. Obviously, agricultural markets won’t lose site of their own fundamentals.”
Farmlead.com founder and RealAg weekly Columnist Brennan Turner stated in his morning update:
What does this mean for the grains markets? Welp, there’s much uncertainty for the EU/UK ag landscape now, but EU grain prices are lower while UK grains just got easier to buy thanks to their currency dropping like a European soccer player (purchasing power from everywhere else is stronger against the British Pound now). With the US Dollar pumping, the Canadian Loonie is flirting with a 76 cent handle again, and futures markets are all feeling some pain with soybeans close to dropping below $11/bu USD in Chicago and canola back below $11/bu CAD in Winnipeg. Corn is likely going to see its largest 1-week loss in the last 3 years, thanks to the better weather and the recent UK referendum. With the Brexit vote out of the way now though, all eyes turn to next week’s numbers from the USDA for quarterly stocks and acres.
Agrimoney.com reported on the immediate impact to the UK wheat futures and the corresponding drop to US values.
London wheat futures soared, bucking the global trend, as the pound tumbled, after the UK shocked financial markets worldwide by voting to leave the European Union.
London wheat futures for November delivery stood 3.1% higher at £118.75 a tonne in early deals, as a collapse in sterling, which earlier hit a 30-year low of £1.32 to $1, boosted the competitiveness of UK exports.
Sterling recovered some ground to stand at £1.39 to $1 as of 10:30 UK time (04:30 Chicago time), down 6.7% on the day.
By contrast, strength in the dollar, as investors rushed for assets deemed as safe havens, depressed US wheat values.
Watch for more on RealAg on how the Brexit vote could impact Canadian agriculture.