Market Report 27th April 2018
Trade closes higher on the week, as markets add further risk premium for potential wheat/corn supply issues for next season. US HRW/Corn Belt weather uncertainty acts as the main catalyst.
Stats Canada estimate 2018/19 wheat area at 25.3m/a (trade est. 23.3m/a). Perception that wheat will be planted at the expense of soybeans/canola.
Algeria buys 420k French wheat. Russian FOB values stabilise at circa $211 following a sharp drop earlier in the week.
US funds estimated net short 61.6k wheat, long 185.3k (corn) and 151k (soybeans).
USDA attaché in Russia pegs 2018 wheat crop at 74mmt, down from 85mmt this season. Though, due to higher carryover from this season of circa 14mmt, they suggest export levels should not be significantly affected.
As Russian wheat production is expected to fall 5%, more corn is expected to be planted however – with exports expected to jump from 4.8mmt to 6.8mmt for next season, as a result.
Euro weakens relative to the dollar following last week’s ECB meeting – supporting Matif Wheat Futures. Disappointing growth for the UK economy contributed to Sterling weakness, supporting Liffe Wheat futures.
WEATHER/CROP DEVELOPMENT
US Corn Belt forecast suggest rains Tues-Thurs followed by warm dry weather. Planting is estimated at circa 16% versus 27% normal for this time of year.
HRW forecasts appear uncertain for the next 2/3 weeks, with little confidence in any organised rain event.
Dry weather in Brazil’s Safrinha corn area is becoming cause for concern, with little respite in the extended forecasts.
Hot, dry weather in parts of Europe continues be monitored. 16-30 day maps currently point to below average rainfall (less than 50% of normal rainfall for some parts of the EU in April).
Cold, wet conditions for parts of the FSU are being closely monitored, with wheat crops struggling to develop.
Canadian Prairies forecasts appear benign and should be conducive to good spring work over the next few weeks.
Argentine soybean harvest reported at 47% complete, up from 40% last week. Corn harvest 36% complete, up from 34% this time last week.
BOTTOM LINE:
Weather continues to occupy centre stage and with extended forecasts for the US HRW/Corn-Belt uncertain - markets have seen to add risk premium. Trade remains conscious that record Global stocks of wheat are being carried into next season and that it is still April, hence, any crop losses are far from certain.
That said, until there is more confidence in US corn planting/establishment and that wheat crop issues are not worsening in US/EU/FSU – markets will likely remain well underpinned.
Conversely, relief of these concerns could threaten a significant sell-off. Expect weather focused, volatile trade to continue, with the US situation at the forefront of market attention.