Market Report 24th August 2018


Markets break sharply lower as funds continue to liquidate positions absent new supportive input.

  • US ProFarmer Tour places average corn yield at 177.3b/a, relative to 178.4b/a from USDA. Historically the tour has been 2.4b/a lower than the USDA’s September estimate, implying final yields may approach 180b/a.

  • Fridays COT report showed US funds reduced positions less than expected, despite the market sell-off. Though numbers only reflect trade to Tuesday. CH+KS Wheat (+125k) Corn (-15k) Soybeans (-40.1k).

  • IGC increase Global maize production by 12mmt to 1.064bmt, up 20mmt on last season. 2018/19 stocks/use ratio is however expected to decline 4% to 23.2% as a result of heightened demand.

  • IGC lower World Wheat Production by 5mmt to 716mmt, with declines largely from the EU-28/AUS (758mmt last season). Ending stocks increased 1mmt however to 248mmt – 266mmt in 2017.

  • German Farm Ministry place winter wheat production at 19.4mmt, down from 24mmt last season.

  • Sovecon estimate the Russian wheat crop at 68.8mmt, in line with USDA (85mmt last year). Exports placed at 33.9mmt, 1.1mmt less than the USDA’s forecast.

  • Field yield reported from Russia this week imply a y/o/y yield decline of 20%, which would point to a sub 65mmt wheat crop if correct.

WEATHER/CROP DEVELOPMENT

  • US Corn Belt weather continues to offer little threat to crops, with good rains and no extreme heat anticipated for the next 2 weeks. Corn ratings down 2% on the week to 68% g/e

  • US spring wheat harvest 60% complete, up from 35% prev. (44% average).

  • Saskatchewan weekly crop report suggests spring wheat 5% harvested with durum 14%. Top soil moisture is reported to be 75% short/very short following circa 2 months of no significant rain.

  • Australia continues to struggle from lack of moisture, with even Western Australia receiving minimal showers. Forecasts imply 2/3 of the Eastern crop areas will miss rains this week.

  • UkrAgroConsult raise warning that hot/dry weather may have harmed their corn crop more than first thought.

BOTTOM LINE:

  • Markets continue to liquidate, driven by both technical selling and a lack of fresh bullish news to provide support.

  • US ProFarmer data released provided few surprises, reaffirming the USDA’s suggestion of a record US corn crop this season. The benign US weather outlook also continues to contribute to the negative sentiment.

  • World grain fundamentals continue to point to a tightening of stocks, but this may not become evident until the second half of the season. If EU/FSU markets won’t lead the World trade higher, then US will be under pressure to fall to become competitive.

  • Given the strength of the recent sell-off, markets may look to trade the ranges in advance of USDA’s next report due on Sep 12th - particularly in light of its significance historically.

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