Market Report 3rd August 2018

August 7, 2018

 

Market sentiment remains bullish as World wheat prices make new contract highs once more, before retracing somewhat.

  • Informa estimate US corn yield at 175.5b/a. FcStone estimate 178b/a. Bearing in mind current issues across the EU, SA, FSU - a record US corn yield would appear to be needed to avoid a tight Global corn balance sheet.

  • Ukraine Ag Ministry announce via social media that grain exports may be curtailed, sending EU markets to surge €10 higher. This position was retracted later in the day prompting a sell-off.

  • Black Sea FOB markets up $11/t on the week. US wheat remains uncompetitive at current levels, suggesting EU/FSU values need to move higher relative to US markets, if demand is to be switched.

  • US funds estimated net short -95k (corn), -66.5k (soybeans), long 51k wheat.

  • AHDB suggest early yield indicators point to a 13.5mmt UK wheat crop, with yields 5-8% below the 5 year average (this data is only based on the South of England results however).

  • BOE announce intention to raise interest rates by 0.25% to 1%. Sterling remains under pressure however as a consequence of ongoing Brexit press.

  • German Farming Association cuts winter wheat crop estimate to 18mmt, down 6.1mmt on 2017.

  • Latest Russian harvest data suggest yields down 14.8% on last year (USDA currently estimate a 15.4% decline). Some suggestion from Ukraine that only 50% of wheat will be fit for milling.

WEATHER/CROP DEVELOPMENT

  • US Corn Belt weather remains benign, with little excessive heat expected along with normal rainfall. US winter wheat harvest 85% complete, versus 86% average for this time of year.

  • EU weather appears extreme for the next 10 days with record heat and little rainfall expected across many parts until the end of next week. Conditions in Hungary/Bulgaria/Romania have been noted to be very good however, having missed much of the drought.

  • Concerns continue to circulate around dryness in Canada Similarly Eastern Australia remains starved of rainfall, prompting suggestions of a sub 20mmt wheat crop (one of the lowest in recent years).

  • UkrAgroConsult suggest 74% of the wheat crop has been harvested. 33% of wheat harvested in Russia.

BOTTOM LINE:

  • Path of least resistance remains higher as Global grain estimates continue to be downgraded week on week, painting an increasingly tight supply picture for 2018.

  • Few changes on the week in terms of fundamental outlook, with issues in FSU, EU, Australia and Canada all unresolved. US funds have begun to build longs in wheat, though shorts in corn and soybeans have been maintained. Trade remain cautious that corrections can happen at any time following the scale of the recent rally and with funds significantly long wheat.

  • Attention now likely turns to USDA, with data due for release Friday and the trade monitoring EU production and US export forecasts in particular. Expect the volatile price action to continue, with crop reports/weather leading direction.

     

     

     

     

     

     

     

     

     

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