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Market Report 2nd November 2018

November 6, 2018

 

Markets close the week largely lower with politics and currency the key
drivers with fundamental news thin.

  • A social media post from the US President implied tensions may be beginning to ease
    with China. Trump suggested trade discussions are ‘moving along nicely’. Soybeans and
    corn led higher as a result.

  • Informa lower US corn yield to 179.7b/a from 182.1b/a in October. FcStone suggest
    181.4b/a in their latest estimate (USDA 180.7b/a).

  • Informa cut Australian wheat production to 16.6mmt, down 1.9mmt on prev. and in line
    with other private estimates.

  • US weekly export sales: 394k (corn) 930k/week needed to reach USDA targets. 583k
    (wheat) above trade expectations.

  • Sterling rallies 1.75% versus the Euro as Brexit news turns more constructive. Still circa
    10% below pre-referendum levels. Sterling strength going forward presents the risk of
    added pressure to London wheat.

  • US funds estimated net long 12k (corn), short -70k (soybeans) and -40k (ch + ks wheat).

  • USDA 10 year baseline data released on Friday. Projected US corn area of 92m/a and
    51m/a for wheat largely above trade expectations. Corn area for this season’s record crop
    89.1m/a.

  • Russian Ag Ministry increase wheat export estimates to 33-34mmt due to an ‘improved
    outlook’ from harvest.

WEATHER/CROP DEVELOPMENT

  • ABARES suggest some rainfall for the Southern and Western Australian grain areas. This may be less than 10mm however.

  • Some concerns still around dry conditions across parts of the EU and winter crop development.
    US corn harvesting continues to progress, estimated circa 70-75% complete.

  • Russian wheat harvesting almost complete. 43.8m/h cut versus 45.2m/h this time last year.

BOTTOM LINE:

  • UK wise, the market continues to grapple with the impending closure of Ensus,
    with wheat supply dynamics moved from a likely situation of deficit to one of
    surplus for the season. This implies the UK may need to become export
    competitive.

  • Brexit continues to present risks for grain values on both sides. A ‘No Deal’ offers
    huge uncertainties for grain exports, whereas a ‘Deal’ scenario suggests serious
    currency risk given Sterling is still valued significantly below pre-vote levels.

  • Global price outlook still appears tied to Russian export pace, and as yet, this has
    failed to slow markedly. USDA are due to release their latest round of S&D’s on
    Thursday. Expect range bound trade in the interim with currency/politics likely
    focal points.

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