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Market Report 27th July 2018

July 30, 2018

Markets continue to advance as World wheat production forecasts continue to decline week on week, pointing to tighter supply conditions for 2018/19.

  • EU Commission MARS reduce their wheat yields estimate by 3.6% - echoing the downgrades being published by other private analysts.

  • Strategie Grains lower EU soft wheat crop to 129.8mmt, approx. 7mmt below USDA most recent estimate. German crop lowered by 2mmt to 20.7mmt.

  • US funds estimated net short -165k (corn), -73.4k (soybeans) long 22.6k (wheat).

  • Canada’s AgriFood Group reduce the Canadian wheat crop by 500tmt to 30.6mmt. Other private forecasters are suggesting a 28-30mmt crop given the lack of rainfall expected.

  • Private estimators continue to point to lower Australian wheat crops, circa 18-20mmt (ABRARES currently 21.9mmt).

  • UK wheat demand continues to be closely monitored with new crop EU maize/wheat now offered under current domestic wheat levels. Any further signs of domestic demand destruction will be closely observed by the trade.

  • Some suggestion that the 25% EU import duty on US corn may be lifted shortly, with both sides announcing their commitment to ‘make a deal’ earlier this week in Washington.

WEATHER/CROP DEVELOPMENT

  • Further indication from Russia over the weekend that yields are running 15% below normal. Current USDA estimates continue to factor in for average yields. US Corn Belt weather remains unthreatening. Crop condition ratings improved to 22% excellent, up 1% on the week.

  • US Wheat Quality Council place spring wheat yields at 41.1b/a, well below USDA’s estimate of 47.6b/a (5 year average 45.4b/a). US winter wheat harvest 80% complete, up 6% on the week. Spring wheat conditions rated 79% g/e somewhat in contrasts to the outlook suggested from the US Wheat Quality Council Tour.

  • Northeast Europe continues to run hot and dry, with little rain the forecasts for the next 2/3 weeks. 88% French soft wheat harvested. Yields and quality results continue to imply a quality decline on harvest 2017.

  • Alberta weekly crop ratings decline by 7% to 66% g/e. Rainfall over the next month will be needed if further declines are to be avoided. East Australian dryness persists with little meaningful rain expected in the next 2/3 weeks.

BOTTOM LINE:

  • In short, bullish news continues to flow gradually through to wheat markets and whilst this remains the case, the trade remains fundamentally well supported. FSU/EU/AUS all hold significant question marks in terms of both yield and quality, with US spring wheat and Canada now also being added to list of concerns.

  • Whilst these issues are ongoing, any sell-offs are likely to be perceived as buying opportunities. That being said, UK wheat has priced itself significantly above EU wheat/maize, with new crop imports already being factored in across the country. As such, the trade will continue to monitor the demand situation closely.

  • Expect the volatile price action to continue, as crop forecasts and weather continue to dominate the focus.Markets continue to advance as World wheat production forecasts continue to decline week on week, pointing to tighter supply conditions for 2018/19. EU Commission MARS reduce their wheat yields estimate by 3.6% - echoing the downgrades being published by other private analysts. Strategie Grains lower EU soft wheat crop to 129.8mmt, approx. 7mmt below USDA most recent estimate. German crop lowered by 2mmt to 20.7mmt. US funds estimated net short -165k (corn), -73.4k (soybeans) long 22.6k (wheat). Canada’s AgriFood Group reduce the Canadian wheat crop by 500tmt to 30.6mmt. Other private forecasters are suggesting a 28-30mmt crop given the lack of rainfall expected. Private estimators continue to point to lower Australian wheat crops, circa 18-20mmt (ABRARES currently 21.9mmt). UK wheat demand continues to be closely monitored with new crop EU maize/wheat now offered under current domestic wheat levels. Any further signs of domestic demand destruction will be closely observed by the trade. Some suggestion that the 25% EU import duty on US corn may be lifted shortly, with both sides announcing their commitment to ‘make a deal’ earlier this week in Washington.WEATHER/CROP DEVELOPMENT Further indication from Russia over the weekend that yields are running 15% below normal. Current USDA estimates continue to factor in for average yields. US Corn Belt weather remains unthreatening. Crop condition ratings improved to 22% excellent, up 1% on the week. US Wheat Quality Council place spring wheat yields at 41.1b/a, well below USDA’s estimate of 47.6b/a (5 year average 45.4b/a). US winter wheat harvest 80% complete, up 6% on the week. Spring wheat conditions rated 79% g/e somewhat in contrasts to the outlook suggested from the US Wheat Quality Council Tour. Northeast Europe continues to run hot and dry, with little rain the forecasts for the next 2/3 weeks. 88% French soft wheat harvested. Yields and quality results continue to imply a quality decline on harvest 2017. Alberta weekly crop ratings decline by 7% to 66% g/e. Rainfall over the next month will be needed if further declines are to be avoided. East Australian dryness persists with little meaningful rain expected in the next 2/3 weeks.BOTTOM LINE: In short, bullish news continues to flow gradually through to wheat markets and whilst this remains the case, the trade remains fundamentally well supported. FSU/EU/AUS all hold significant question marks in terms of both yield and quality, with US spring wheat and Canada now also being added to list of concerns. Whilst these issues are ongoing, any sell-offs are likely to be perceived as buying opportunities. That being said, UK wheat has priced itself significantly above EU wheat/maize, with new crop imports already being factored in across the country. As such, the trade will continue to monitor the demand situation closely. Expect the volatile price action to continue, as crop forecasts and weather continue to dominate the focus.

     

     

     

     

     

     

     

     

     

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