Market Report 18th January 2019
London wheat sharply lower on the week as firming Sterling and negative Brexit sentiment drives selling.
Some reports that China may agree to import $1 trillion in US goods over the next 6 years to help balance the trade deficit. Jan 30th/31st are the next significant dates planned for top level meetings.
US government shutdown continues with no clear signs of resolution evident. USDA crop reporting now expected in February at some point.
Russian prices continue to work higher, making US/EU supplies more competitive. Russian FOB values trading at circa $246 on Friday, up $9 in the last 2 weeks.
Reports that Russian exporters are having to pull wheat supplies from further and further inland with nearby stocks depleted, incurring higher transport costs and taking more time to co-ordinate shipping.
Brexit uncertainty continues with the PM believed to be trying to gather a conservative/DUP consensus that would support a deal without a backstop, in the hope the EU will soften its position.
Sterling has firmed this week following the Governments defeat in the House of Commons, basis the perception that the prospect of a ‘No Deal’ Brexit has been reduced and the likelihood of Article 50 being pushed back is now increased – making a ‘softer’ Brexit appear more likely.
US funds estimated net long corn (124k), long soybeans (13k) and square wheat.
19mmt increase in EU soft wheat production expected next season according to Strategie Grains – taking production to 146.4mmt (up 15% year on year). Barley production est. of 61.8mmt would be up 11%.
WEATHER/CROP DEVELOPMENT
US HRW Belt expected to receive freezing temps over the next few weeks with snow cover deemed inadequate in a number of areas.
FSU winter crop appear in good condition with reasonable snow cover and forecasts relatively unthreatening.
BOTTOM LINE:
Globally and domestically markets remain politically charged, with US/China trade talks, the US Government shutdown and Brexit developments, all serving to dictate the tone of their respective markets.
Fundamentals wise, the trade will continue to monitor closely whether higher Russian values will accelerate their slowdown in exports and at what stage that business begins to transfer to EU/US. Although early in the season, winter crops for the World’s key producers appear in broadly good condition, with few major weather concerns to consider at this stage.
In short, politics/currency continue to dominate proceedings, particularly for the UK trade with physical market activity thin. Expect more of the same as we progress towards spring, when weather should again begin to grow in significance.