Market Report 1st February 2019
Markets close largely unchanged on the week as the trade looks ahead to Friday for much awaited USDA data.
Some optimism surrounding US/China trade talks as Trump gives positive feedback re. agreements supposedly made on Ag products as well as hints of a wider agreement. Political analysts continue to suggest there are wide differences between the two sides.
Sovecon increase estimate of 2019 Russian wheat crop by 2.7mmt to 80mmt as a result of higher winter plantings and benign weather to date for wheat crops.
Russian Ag Ministry reduce wheat export estimate for the season by 1mmt to 36mmt.
US export sales for late December reported at 1.7mmt (corn), 530tmt (wheat), 2.4mmt (soybeans). All in line with expectations. US wheat exports continue to be down 10% year on year. Up to date exports will not be released until mid-March following the Gov shutdown.
US funds estimated net long circa 110k (corn) -20k (wheat), square soybeans.
Egypt buys 360tmt wheat French/Romanian origin. Russian offers were priced out, further implying supplies are beginning to tighten - though French offers were perceived to be aggressive. US was also too expensive.
Egypt forecast 2019 domestic wheat crop at 9.5mmt, up 500tmt on this season (larger planted area expected).
Brexit developments continue to dominate London wheat trading. Latest political analysis increasingly points to a ‘softer Brexit’ - economists imply this would more likely firm Sterling from current levels.
WEATHER/CROP DEVELOPMENT
US wheat crop winterkill remains a possibility in light of recent freezing conditions. Though snow cover is perceived to be adequate in most major growing areas.
UK winter crop conditions continue to be anecdotally reported in very good condition, despite the recent colder conditions.
FSU/EU winter crops also appear to be in reasonable health according to reports from the areas.
BOTTOM LINE:
Markets chop sideways this week, staying within recent ranges absent new fundamental developments.
In short, market dynamics remain unchanged with the US focused on Chinese trade negotiations, the EU on declining Black Sea wheat availability and UK on Brexit.
USDA reporting due on 8th is widely expected to be significant to market sentiment going forward given the context surrounding its release. Expect range bound trade in the lead up.