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Market Report 11th May 2018


Markets fall this week as neutral USDA data and improving weather outlooks for US/EU/FSU help drive the sell-off. USDA:

  • US 2018/19 all wheat production placed at 49.56mmt, up 2.2mmt from the April report (above trade est. of 48.2mmt). HRW production estimated 17.6mmt – down 14% y/o/y.

  • 2018/19 World wheat ending stocks (subtracting China and India, who typically do not participate in wheat trading) estimated at 115.7mmt – over a 6 year low.

  • USDA lower 2018/19 Global corn carryover by 36mmt (largely due to historic reductions from China).

  • 2018 Brazillian corn output reduced by 5mmt to 87mmt (trade est. 88.5mmt).

  • US funds estimated net short 41.8k wheat, long 219k (corn), 94.6k (soybeans).

  • Stats Canada report March 31st wheat stocks at 16.4mmt (500tmt lower than trade expectations).

  • Sterling weakens somewhat as the BOE decide to hold interest rates - supporting London wheat.

  • US/China trade talks recommence this week. Trade will be conscious of potential spill over from external markets. Soybean/corn markets likely to be the most sensitive to developments.

WEATHER/CROP DEVELOPMENT

  • US Corn Belt planting progress estimated at circa 57% complete versus 63% average for this time of year.

  • US Corn Belt weather shows showers for the next 2 weeks, though models on thurs/fri did indicate the heaviest rains would fall further south than originally predicted.

  • US HRW areas forecast for better rains this week.

  • Drier forecast for Argentina should boost harvest progress.

  • Brazil’s Southern Safrinha corn area is due for beneficial rains next week – though questions remain as to whether they will come too late to materially improve crops.

  • Ukraine corn planting 83% complete versus 90% this time last year. 6/7 weeks of dry weather have been stressing winter crops, but forecast indicate better moisture next week.

  • Russia and Eastern Europe more generally should also benefit from these rains next week, following on from 2 months of drier than normal weather.

  • Alberta reports spring wheat seeding progress at 8.7% versus 30% average for this time of year. Australian conditions continue to look dry, with little respite in the forecasts.

BOTTOM LINE:

  • USDA data featured briefly before market attention quickly returned to weather and crop conditions.

  • US Corn Belt planting weather appears more favourable than first forecast, whilst rains for US HRW areas, as well EU and FSU this week are expected to boost crop conditions. Presence of the sizeable US fund long in corn may have contributed to selling late in the week.

  • UK wise, sterling weakness and a tighter wheat carryover into next season continue to provide support. Winter wheat conditions will remain closely monitored as such.

  • In short, weather continues to be the primary focus, with emphasis on the US/EU/FSU in particular. Traders will also be conscious of potential geo-political/currency developments with US/China trade talks scheduled this week.

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