Market Report 2nd Mar 2018


US/SA crop concerns help drive significant US fund buying through the week, before markets sell-off late on Friday. US futures close circa $13 up on the week.

  • DEFRA revise UK wheat production lower by 326tmt to 14.837mmt, though demand also reduced by 507tmt. Suggests a balance in excess of 1mmt to be exported, taking out normal strategic carryover stocks.

  • US funds estimated net short 51k wheat, long 135.3k corn and 136.6k soybeans.

  • US weekly export sales reported at 1.75mmt corn, 191k wheat. Strong export/ethanol/feeding demand for corn remains apparent - though large amounts of farm corn is still believed unsold.

  • Buenos Aires Grain exchange reduce Argentina’s soybean crop by 3mmt to 44mmt (down 13.8mmt on 2017), corn forecast left unchanged at 37mmt (down 2mmt on last season).

  • Russian wheat prices continue to firm to new highs, with $207 fob traded last week. Firmer rouble and weather related logistical issues have helped support the rise.

  • EU Commission lower EU wheat exports estimate to 24mmt. Still perceived to be too high unless export pace picks up considerably in the second half of the season.

  • Sterling weakness continues on Brexit concerns, supporting London wheat.

WEATHER/CROP DEVELOPMENT

  • Argentinian weather pattern continues to look drier than normal, with little rain expected this week or next for key growing areas.

  • US wheat crop condition reports fall for Kansas by 2% - leaving a good/excellent rated crop of 12%, circa 31% lower than this time last year. Similarly only 4% in Oklahoma rated g/e, down 39% on last year. US Southern Plains forecast continue to suggest dry weather for the next 2 weeks.

  • France AgriMer report wheat conditions 83% g/e, down 2% on the week. Heavy rains forecast for Western Europe will be monitored, as well as cold/dry conditions for Northern/Eastern Europe and the FSU.

BOTTOM LINE:

  • Funds weighed in last week following the release of negative crop ratings for US HRW Belt, taking CBOT futures sharply higher, before running out of buying late on Friday.

  • Little has changed fundamentally over the course of the week. Wheat/corn stocks are sizeable into next season, suggesting current issues need to translate into serious crop losses if markets are to maintain current levels.

  • That said, funds continue to hold a significant short in wheat and forecasts suggest little relief to US Southern Plains or Arg/Brazil crops over the coming weeks. Whilst this remains the case, markets should remain well underpinned. Expect volatile/weather focused trade to continue this week, with US crop condition reports tonight, likely to be closely monitored.

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