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Market Report 22nd June 2018


Markets close mixed as weather/politics continue to shape direction and traders start to turn attention towards USDA stocks/acreage data, due for release Friday.

  • Russia’s Ag Minister suggests the country could harvest ‘up to’ 100mmt of grain this harvest. Private analysts Sovencon’s latest report suggested 119.6mmt, so perhaps suggests further downgrades in production may be forthcoming.

  • US weekly export sales disappointed, with 506tmt reported for corn and 462tmt for wheat. Despite the poor sales of corn, exports to date are still in line to meet current USDA targets. US wheat remains uncompetitive globally, as it has all season.

  • US/China trade dispute continues to draw trade focus, with the US set to announce planned restrictions on Chinese investments in the US, as well as greater export controls later this week. Any further escalation likely contributes weakness to commodities.

  • EU announce tariffs on $3 billion of US goods in retaliation against recent trade sanctions from President Trump, including corn. Approx. 1mmt shipped to the EU from the US annually.

  • US funds estimated net short -4.8k CBOT wheat, -57.5k corn and -27k soybeans. Egypt’s GASC buys 240k wheat (Romanian origin).

WEATHER/CROP DEVELOPMENT

  • US Corn Belt weather appears unthreatening with beneficial rainfall continuing to fall across almost all key growing areas. Higher temperatures are expected towards the end of the week, though early indications are that that they shouldn’t last. US SRW areas forecast for above normal rains and temperatures most of this week. Winter wheat ratings improve to 39% g/e (up 1% on the week).

  • Hot, dry weather in Southern Russia and Eastern Ukraine persists, with little meaningful rain anticipated for these areas in the 7-10 day forecasts. Some better rainfall has featured for Central/Western Ukraine over the last week. French wheat ratings down 2% on the week to 72% g/e.

  • Australian wheat continues to suffer from hot, dry conditions – particularly further east. Heavy rains in Northern China believed to be stressing wheat crops. 10-20% yield loss is being discussed.

BOTTOM LINE:

  • Markets continue to chop sideways after the recent heavy selloff, as the trade consolidates to an extent ahead of USDA’s all important report later this week. US/China dispute continues to hang over the markets, keeping the trade on edge, whilst US growing conditions remain near ideal, with plentiful rain in the forecast for the remainder of the month.

  • Black Sea weather continues to run hot and dry, with little respite in the worst affected areas for the next 10 days. That being said – Russian domestic prices have declined in recent weeks as the earlier harvest has begun to pressure near term values. Until FSU crop losses are better clarified and begin to be reflected in Black Sea Futures - international markets may struggle to sustain any move higher.

  • Expect choppy, sideways market action in the lead up to Fridays USDA report with US/FSU weather as well the US/China political situation likely to dominate the focus.

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