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Market Review 27th Nov 2017

Markets continue to erode, as US Wheat makes new contract lows late in the week.

 France AgriMer lower wheat export projections by 300tmt to 9.9mmt. Total EU wheat exports of 8.1mmt this season are still circa 22% below 2016/17.  Russian wheat exports of 15.6mmt from 1st July, up 25% on the year.  US wheat export sales were lower than expected, at just 199tmt (trade est. 350-550tmt). 3rd lowest of the marketing year to date.  US funds estimated net short 131k wheat, 245k corn. COT report due for release today.  Argentine government officials increase wheat production estimates to 18mmt (BAGE 17mmt).  Brazil’s AgroConsult place the countries corn crop at 94.4mmt, down 900tmt on prev (USDA est. 95mmt)  Sterling strengthens somewhat post release of the UK budget, pressurising London wheat futures.  Details on the closure of the bioethanol plant Vivergo for maintenance remain unclear – though any sustained closure would act to increase stocks and undermine UK wheat futures.

WEATHER/CROP DEVELOPMENT US Corn harvest estimated 90% complete (95% average). Warm, dry US forecasts continue. Little threatening in the forward models at present. US wheat conditions decline 2% on the week to 52% g/e. 58% recorded this time last year and 5 year average of 54% g/e. 6-10 day forecast suggest slightly wetter conditions for Argentina, which should boost crop prospects. BAGE report Argentine corn planting at 35.8% complete (41.1% this time last year). 20% of the wheat crop reportedly harvested. Rains forecast for Southern Australia could hinder harvest progress.

BOTTOM LINE: In spite of thin news this week, US wheat broke through to make new contract lows, with MATIF also matching lows on Friday’s session. In short, at present, there’s little in the way of a clear catalyst to stimulate a sustained rally over the coming months apparent - outside of perhaps a sharp deterioration in SA weather. Northern Hemisphere weather remains largely benign and Global stocks of wheat/corn continue to weigh heavily on the market. Though US funds are heavily short, given the current Global oversupply of grain, there is little immediate incentive for funds to exit these positons. Expect market weakness to continue absent supportive weather developments, with any rallies likely to viewed as selling opportunities.

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