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Market Report 13th July 2018


Markets consolidate early in the week before rallying in response to supportive S&D data released by USDA. USDA Headlines:

  • US corn old crop carryover lowered by 1.9mmt to 51.48mmt. Trade largely expecting an increase in stocks. Decrease largely as a result of increased exports forecast.

  • US corn yield projection left at 174b/a – trade forecast closer to 180b/a at present.

  • World wheat production reduced by 8.4mmt to 736mmt (21mmt below last year). Main declines came from the EU, Australia, Russia and Ukraine.

  • Major exporters stocks/use ratio for 2018/19 wheat approx. 22.4% basis the latest USDA data. Lowest level since 2006 and 6-8% below the level of the last few years.

  • Russian Ag Minister estimates wheat crop at 64.5mmt, compared to USDA at 67mmt. Other private estimates range from 68-72mmt, with Sovecon out at 69.6mmt earlier in the week.

  • US funds estimated net short -141k (corn) -1.2k (wheat) -64.5k (soybeans).

  • CONAB place Brazilian corn crop at 82.9mmt, down from 85mmt previously (97.8mmt last year).

  • French Ag Ministry place wheat crop at 36mmt, only 0.5mmt lower than last year. Estimate 3mmt higher than that released by Strategie Grains last week.

WEATHER/CROP DEVELOPMENT

  • US Corn Belt weather perceived to be unthreatening, with temps expected to moderate this week. Crop rated 75% g/e, down 1% on the week

  • US spring wheat conditions rise 3% to 80% g/e - historically an extremely high level. Heading is at 81%, compared to 69% 5 year average, raising some doubts as to potential quality levels.

  • BAGE report Argentine corn harvest at 71% complete, up from 63% the previous week (64% 5 year average). Wheat reportedly 87% planted, up 8% on the week.

  • Western areas of Russia and Ukraine forecast for rains this week. Models for driest parts of Eastern Ukraine and Southern Russia are less clear.

  • UkrAgroConsult suggest 28% of wheat has been harvested

  • Saskatchewan wheat rated 77% g/e after good rains over the last few weeks.

  • ABARES continues to point to dry conditions for Eastern Australia. Scattered showers are expected for Southern areas.

  • Rains forecast for France/Germany over the next 2 weeks expected to hinder harvest progress. French crop ratings reduced by 1% on the week to 72% g/e (still a relatively high level).

BOTTOM LINE:

  • Markets close lower on the week despite constructive wheat/corn data released by the USDA on Thursday.

  • Fundamentally, wheat crop concerns in Russia, Ukraine, EU and Australia remain unresolved and as such, this implies a sharp decline in availability for 2018. Markets may well need more clarification of harvest results before moving higher however, particularity with US/China tensions ongoing and benign US weather prompting questions of a record corn crop.

  • Expect choppy, volatile trade to persist with FSU/EU/US harvest results and crop conditions central to trade ideas over the next few weeks.

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