Market Report 25th January 2019
Politics continues to dominate as firmer Sterling linked to Brexit keeps London wheat under pressure, whilst the US Government shutdown is finally ended, albeit temporarily.
Trump agrees deal to temporarily end the US government shutdown while negotiations can take place over funding for the proposed wall. USDA supply and demand reporting is expected on 8th February. Dec 1st stocks and US wheat plantings will be of particular interest to the trade.
Export sales data has been put on hold too and will also be in the focus – largely as traders seek to clarify to what extent export demand has been diverted from FSU to the US in recent weeks.
Some speculation that China may have bought US wheat last week as part of ongoing trade negotiations between the two nations.
Russian Ag Ministry have reportedly asked all exporters to submit all sales for the rest of the seasons to help them assess the current situation better. Ukrainian Ag Ministry have also issued a ‘warning’ over any further exports with milling wheat sales at 83% of the 8mmt limit.
Latest perception that a ‘softer Brexit’ appears increasingly more probable continues to firm Sterling - putting pressure on London wheat as a consequence.
IGC increase old crop Global wheat production estimate by 8mmt to 737mmt – largely down to increases in Indian/Russian estimates. Russian exports raised 1mmt to 33.5mmt (still below the 36mmt estimate made by USDA).
Informa project US corn area at 91.5m/a in their latest report, down 400,000a on prev. (89.1m/a last season). Winter wheat planted area estimate of 31.5m/a circa 1m/a lower than last season - would be near record low.
WEATHER/CROP DEVELOPMENT
Freezing conditions across the US Midwest continue to be monitored closely, particularly given speculation continues to surround a suspected decline in US winter wheat planted area.
Australian wheat crops have been harvested but the drought continues with temps estimated 8-10 degrees above normal, with rainfall minimal (grain sorghum and cotton still to be harvested). Suggestion that a smaller sorghum crop would mean more wheat would be required for domestic feeding – further limiting wheat export potential.
BOTTOM LINE:
Thin news this week with the trade largely awaiting some clarity on a schedule for USDA reporting, which we now appear to have.
Otherwise, Globally the main themes remain unchanged with focus on the US/Russian/EU old crop wheat export dynamic as well as the progress of US/China trade negotiations and any consequent ramifications for Ag markets.
Brexit and Sterling direction continues to dominate UK wheat trading, particularly absent active physical markets with both buying and selling slow due to the ongoing political uncertainty at present.
USDA S&D reporting on the 8th Feb will be a clear target for the trade now. Expect more of the same in the lead up with politics/currency likely to remain the key determinates - particularly for domestic markets.