Markets higher early in the week before consolidating, as USDA release bearish corn/soybean data, with declines in wheat production less bullish than expected. USDA Headlines:
US corn yield estimated at a record 178.4b/a, above trade expectations. (176.6b/a last season). Production consequently moved 9.05mmt higher to 370.51mmt.
World wheat production lowered 6.6mmt to 729.63mmt, despite the trade anticipating a sharper decline. Australian/Canadian estimates unchanged, despite falling private estimates. EU production lowered 7.5mmt to 137.5mmt (Strategy Grains 127.7mmt).
Russia/Kazakhstan’s estimates also raised 1.5mmt, whilst global consumption reduced 5.1mmt, leaving ending stocks only 1.9mmt lower than last month at 258.96mmt.
US wheat crop reduced marginally to 51.08mmt, although sharper declines were expected for spring wheat following the US Crop Tour results.
Russian wheat crop private estimates placed at 70.4mmt (IKAR) and 68.4mmt (Sovecon), down 600tmt and 1.2mmt on prior figures respectively (USDA 68mmt).
US funds estimated net short -68k (corn) -63k (soybeans), long 124k (ks+ch wheat).
Talk of Russia restricting wheat exports at some stage continues to circulate with internal prices rising as a consequence of the weaker Ruble and food inflation very politically sensitive historically. Any suggestion of a cap would see a sharp reaction from markets.
WEATHER/CROP DEVELOPMENT US
Corn Belt weather continues to appear largely benign. Temperatures are expected to be normal/above normal for the next 2 weeks, though heat is not expected to be excessive. Showers expected across Southeast areas.
Western Australia receives up to 15mm of rain though the driest Eastern areas continues to look hot/dry.
Saskatchewan topsoil moisture rated 58% short/very short. Harvest progress estimated at 1% complete, in line with the 5 year average.
BAGE place Argentine wheat seeding at 98.7% complete, with conditions reported to be largely good.
UK winter wheat harvest estimated to be 60% complete (5 year average for this time of year circa 30%). Early yields based on data from the South of England suggest an average of approx. 7.8t/h, down from the average of 8.2t/h.
USDA occupied the focus this week, with wheat data less bullish than expected, leading markets sharply lower Friday, aided in part by weakness in soybeans/corn.
Trade perception remains that Global wheat availability should tighten significantly this season given the likely EU/FSU production declines, with crop issues in Australia/Canada also yet to be fully accounted for by the USDA.
That being said, bullish sentiment may continue to be tempered by prospect of a record high US corn crop, as well as negative sentiment associated with the ongoing US/China economic struggle. Trade will be conscious of the large US fund long in wheat and that a sell-off could be triggered at any time, given the scale of the rally to this point.
Expect weather/private crop estimates to regain the focus over the next few weeks, with the volatile price action likely set to continue.