Market Report 26th October
US markets fall to 6 week lows before consolidating somewhat. Russian wheat availability/firmer dollar helps contribute to the weakness.
Ensus announce intention to shut from the end of November due to ‘difficult market conditions’. London futures under pressure as a consequence.
Russian Ag Ministry met with exporters on Friday to reiterate they do not wish to introduce export duties. 33-34mmt of wheat exports remain expected according to officials.
Based on the current pace of Russian exports slowing gradually to the end of the year, that would leave approx. only 9mmt still to export Jan-Jun (last season 18.9mmt was exported over this period).
Egypt’s GASC buys 470k wheat, largely Russian/Ukrainian origin, but did include one cargo of US wheat. Algeria buys 600k French wheat.
EU Commission cut 2018 soft wheat production estimate by 1.3mmt to 127.4mmt (142.1mmt last season). Exports estimated at 20mmt, similar to last season’s 21.3mmt in spite of the drop in production.
ABARES estimate Australian wheat crop at 16.6mmt – down 2.5mmt from their September estimate (USDA 18.5mmt).
IGC increase Chinese wheat production by 12.2mmt to 134.7mmt (138.2mmt last season). Impact limited as China tend not participate in the import/export of wheat.
US funds estimated net long 27.9k (corn), short -39.2k (soybeans), short -30k (ch wheat), long 17.1k (ks wheat).
US weekly export sales disappointed - 350k (corn), 443k (wheat) and 212k (soybeans).
WEATHER/CROP DEVELOPMENT
US corn harvest progress estimated around 60% complete, up from 49% the week before. WCB weather appears reasonable for harvesting this week, though some rains are expected in south-eastern areas of the Corn Belt.
ABRARES suggest Australian weather in November will be drier than normal.
Saskatchewan weekly update suggests 92% crop have been harvested, up 10% in the week. Spring wheat now estimated at 97% complete, roughly in line with normal. Some question marks continue to surround quality, given the weather over the last month.
BOTTOM LINE:
Markets active last week, with the tone generally more negative both domestically and globally for wheat.
Russian exports continue to weigh heavy on World markets and in spite of the first US wheat sale to Egypt last week, trade perception remains that sustained business will likely be needed if markets are to move upwards from current ranges.
The closure of Ensus is significant for the UK wheat market as it changes the dynamic from one of tightness to one of potential surplus. Moreover current expectation is for a significantly higher wheat area going into harvest 2019 – further contributing pressure to London values.
In short, the trade will continue to monitor Russia closely for any indication of exports slowing - otherwise expect weather, politics and currency to be the main features day-to-day.