Market Report 10th May 2019


US markets hit new contract lows briefly, as USDA paints a bearish picture in their latest S&D's.

  • USDA places 2019/20 World wheat carryover at 293mmt, 16mmt above trade expectations.

  • Global wheat production for 2019/20 estimated at a record 777.5mmt, up 45mmt on this season (well above trade estimates - IGC 762mmt). Of this EU production expected to rise 16.5mmt.

  • US Corn ending stocks estimated at 63.13mmt for next season, up 9.9mmt year on year. Sharply outwith trade expectations of around 54mmt. Global corn production also increased by 15mmt to 1134mmt.

  • US trade tariff hike with China goes ahead as the two sides fail to find agreement on Friday. $200 billion in Chinese goods thought to be affected.

  • US funds estimated net short -296k (corn), -163k (soybeans), -148k (Ch+Ks wheat).

  • Russian Ag Ministry announce intention to extend zero tariffs on grain exports for another year, with a large in rebound in production expected next season.

Weather/Crop Developments

  • US Corn Belt planting remains problematic, with cold, wet weather holding up progress. Forecasts for this week are more settled with extended models pointing to a wetter pattern for the rest of the May.

  • Trade increasingly conscious prevent plant dates of 25th May-5th June edging closer and only circa 25% of the US corn crop has been planted to date.

  • US, EU, FSU, Australia and Canada all forecast for a large rebound in wheat production (per USDA) with growing conditions benign.

Bottom Line

  • US/China trade pessimism combined with bearish data from USDA lead markets lower through the week, with little supportive news forthcoming to discourage selling.

  • The US corn plantings situation will be closely monitored, but historically plantings have caught up very quickly in a short period of time when conditions allow. US/China trade negotiations and Brexit will clearly continue to influence Global and domestic price direction, whilst the speculative sector is extremely short - offering some underlying technical support.

  • That said, weather is the focus presently and by and large that continues to be non-threatening - hence the negative market sentiment. While this remains the case, rallies may struggle to extend.

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