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Market Review 20th Nov 2017

Markets close lower on the week, with US wheat approaching contract lows, before consolidating.

 Informa estimate US 2018/19 corn area at 91.4m/a, up from 90.4m/a this season. All wheat acreage placed at 45.6m/a versus 46m/a this year.  Ag Canada suggest 2017 wheat production of 27.1mmt, versus last year’s crop of 31.7mmt. Canadian wheat/durum exports since Aug 1st 5.48mmt versus 5.03mmt last year.  UK wheat exports reported at 147tmt to the end of September, down 78% on the same period last year. Imports for the first quarter of the season were broadly similar to last season at 419.1tmt (down 2%).  Vivergo announces intention to shut for maintenance, with intake expected to resume in 2018 at some point. Should add to the UK wheat surplus and thus put pressure on futures.  US funds estimated net short -125k wheat, -244k corn (record high if correct).  Uncertainty surrounds Egytian exports as Government Officials reportedly reinstate the zero ergot policy. Pricing levels may move to factor in the additional risk of rejection.  Egypt’s GASC buys 240tmt Russian wheat for January.

 EU soft wheat export licences reported at 339tmt, taking the season total to 7.5mmt (down circa 23% on last year).  France AgriMer reduce French wheat export projections by 300tmt to 9.9mmt for the season.  Strategie Grains reduce EU wheat acreage estimate for 2018/19 by 300,000h to 23.5m/h (4th consecutive year of declines).

WEATHER/CROP DEVELOPMENT Dry weather in Argentina remains cause for concern, with very little rain in the 2 week forecasts. Less than 50% of normal precipitation for the main growing areas since august. Argentina’s corn crop now 47% planted, versus 43% last year and 44% 5 year average Ag Rural report Brazil main corn crop planting at 63% complete. 79% this time last year, with 65% the 5 year average. US Southern Plains warm and dry. Wheat conditions expected to have declined somewhat on the week.

BOTTOM LINE: Little fundamental change to the picture this week as US/EU markets edge closer to contract lows. SA weather deterioration and US fund short covering appear the main potential catalysts for a rally, though at present, perception is that neither look imminent. Expect more sideways, to lower trade over the coming weeks absent supportive developments.

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