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Market Report 19th Jan 2018

January 30, 2018

Matif continues to sell-off, driven by both the firm Euro and large stocks of old crop EU wheat hanging over the market.

  • Sovecon report Russian wheat exports at a record 3.86mmt for December, further suggesting Jan exports will be circa 3.2mmt. Barring a sharp slowdown in export pace, Russian wheat exports could exceed 40mmt for the season (35mmt USDA).

  • EU weekly export licences of 211tmt take the season total to 11.33mmt, down 18.5% year on year. Reports of 200tmt of Argentine wheat to Algeria this month further illustrate the competitiveness of the export market - particularly whilst FSU conditions remain benign, allowing exports to progress unhindered.

  • US wheat exports continue to struggle with 152tmt reported on the week (300- 500tmt expected).

  • Euro remains close to 4 year highs versus the dollar, keeping matif futures under pressure and restricting EU exports.

  • US funds estimated net short 156.6k wheat, 253.1k corn.

  • India report wheat area at 29.9m/h, down 1.2m/h on last year.

WEATHER/CROP DEVELOPMENT

  • US Southern Plains remain dry, with little rain in the forecast in the next 2 weeks. Temperatures expected to return to seasonal levels.

  • Argentine weather continues to be monitored closely, with below normal rainfall for the next 2 weeks cause for concern (particularly for soybeans).

  • Black Sea winter crops remain in largely good condition after the mild winter.

  • Western Australia receives good rains over the weekend, but soil moisture levels across other parts of the country appear low.

BOTTOM LINE:

  • USDA data released earlier this month served to both reinforce bearish old crop World wheat fundamentals and reduce the need for risk premium attached to new crop (built in on the assumption of a reduced US winter wheat area).

  • Large US spec short should continue to provide some underlying support, whilst SA/US conditions will remain closely monitored, particularly as we advance towards spring.

  • In short, whilst FSU wheat exports continue to move unhindered and absent significant Global new crop production issues, any rallies are likely to continue to be viewed as selling opportunities.

     

     

     

     

     

     

     

     

     

 

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