Market Report 31st August 2018


Markets recover somewhat this week following the recent sell-off, as talk of potential Russian export controls helps provide support.

  • Speculation continues to circulate that Russia may look to put in place export restrictions of some kind. Russian ministers are due to meet on Monday to discuss.

  • Exporters have been assured of one months’ notice before any tariffs would be applied – encouraging large early season exports (that combined with the weaker Ruble). Wheat exports this season so far of 8.2mmt are up 60% on last season.

  • Egypt buys another bulk of new crop wheat, largely Russian origin (over 1mmt of Russian wheat offered as exporters seek to secure business while they can).

  • FcStone estimate US corn crop at 177.7b/a (USDA 178.4b/a).

  • Argentina is believed to be considering a 10% export tax on both wheat and corn.

  • Stats Canada place all wheat production at 29mmt, lower than trade expectations of around 30.6mmt (30mmt last season).

  • US funds estimated net short -79k (corn), -61k (soybeans), long 106k (Ks+Ch wheat).

  • Suggestion from Brussels that the EU may be softening its stance on Brexit in efforts to help secure a deal (GBP/EUR still approx. 15% below pre-Brexit vote levels).

WEATHER/CROP DEVELOPMENT

  • US corn condition ratings 68% g/e, up 1% on the week. US spring wheat harvest 67% complete versus 61% average for this time of year. Still appears little threatening in the US forecasts.

  • Australian dryness continues to be of concern despite some recent rains. New South Wales August rainfall the lowest in 5 years. ABARES suggest the recent rains were less comprehensive than expected. Longer term forecast also suggest warmer and drier conditions than normal through to November.

  • BAGE report Argentine corn harvest at 98% complete. Crop estimate held at 31mmt (USDA 33mmt).

  • Saskatchewan weekly report suggests harvest progress 27% complete (20% 5 year average).

  • Northern EU looks dry for the next 2 weeks. Similarly Southern Russia/Ukraine appear dry through till mid-month.

BOTTOM LINE:

  • Markets rebound to an extent following the recent break lower, as confidence in Russian export controls of some kind this season build - helping to encourage buying.

  • Fundamentally, the problem areasremain the same, with well reported crop issues in FSU/EU/AUS implying reduced wheat availability this season. Moreover, the technical outlook appears more constructive for MATIF/CBOT after last week’s rally – though US funds continue to hold large spec longs in wheat.

  • USDA reporting next Wednesday will be the next target for the trade, expect any export policy news in the interim from Russian and to a lesser extent Argentina, to be treated with sensitivity.

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