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.