Market Report 14th December 2018
Markets close higher on the week helped by gains in US corn/soybeans. Brexit still the dominant feature for London wheat.
USDA raise Global corn ending stocks by 1.29mmt to 308.8mmt (slightly above trade expectations). Global wheat ending stocks raised 1.39mmt to 268.1mmt, also marginally above trade ideas.
Wheat production reduced 500tmt for Australia to 17mmt, with Canadian production increased by 300tmt to 31.8mmt.
Speculation that China will resume buying of US corn from January, with 3mmt of volume being discussed. 5mmt of total corn imports are anticipated from China this season– mostly from the FSU. Trade will need to monitor closely to see if FSU supplies are displaced or if this is additional business.
Russian Ag Ministry due to meet with exporters on the 21st Dec. Officials expected to insist domestic supplies are kept adequate. Russian FOB values up $7/t on the week.
US funds estimated net long 90k (corn), short -1k (soybeans) and -22k (ch + ks wheat).
US weekly export sales: 903tmt (corn), 754tmt (wheat), 792tmt (soybeans). In line with expectations.
Russian wheat exports July-Dec estimated at 23.7mmt. Based on current estimates, would leave approx. 10mmt to be exported Jan-June, compared with 19mmt last season.
Brexit related volatility for Sterling and consequently London wheat continues after the PM announced her decision to delay the House of Commons vote till January amid expectation that the deal would be heavily defeated.
Scottish Gov data published places final Scottish wheat production at 681tmt, down 23% on the previous year. This is due to a 9% reduction in area as well as 16% fall in yields.
Winter barley production of 268tmt is down 24% on the previous year, mostly due to a 21% decline in area. Spring barley production is estimated down 3% with oats down 5% and OSR down 12%.
WEATHER/CROP DEVELOPMENT
Southern Brazil has been hot and dry with conditions expected to persist in the short term.
Some rainfall expected in Southern Argentina, though forecasts continue to look too dry for many parts.
UK winter crops are widely reported to be in excellent condition across the majority of areas.
BOTTOM LINE:
Supportive tone continues this week in spite of an otherwise routine USDA report. Optimism surrounding the US/China situation and potential for China to resume buying in the New Year helped encourage buying.
Russia’s export status will continue to be monitored closely - starting with next Friday’s Ministerial meeting - with a slowdown still widely expected. Domestically however, Brexit developments remain the central focus, particularly as traded volumes begin to slow as the holiday period approaches.
Underlying support from US should help underpin markets at least to an extent in the short term. That aside, expect politics/currency to dictate UK price direction.