Market Report 8th February 2019
Markets close lower on the week, as USDA data largely underwhelms.
USDA report US winter wheat area at 31.3m/a, a new record low (32.5m/a last season). Trade expectations circa 32m/a. In spite of this, US supplies are still anticipated to be ample next season with end of season stocks only expected around 3mmt lower.
US corn yield lowered to 176.4b/a (178.9b/a prev.). Amounts to one of the largest ever changes from a Nov to Jan report.
Impact on US S&D limited however as corn feed/ethanol usage estimated down circa 3.8mmt.
Egypt’s GASC buys 300tmt wheat, split between US, French, Ukrainian origin. US offers notably cheapest. Best Russian c&f offers $4/5/t higher.
EU wheat exports to Non-EU destinations remains down 26% year on year.
US funds estimated net long 70k (corn), 5k (soybeans), and short -25 k (ch + ks wheat).
France AgriMer increase end of season stocks by 100tmt to 2.9mmt. Although exports were seen higher, this was offset by a reduction in domestic feed usage.
DEFRA Basic Payment Scheme flags up some major differences in English cereals planted areas relative to their June report. 2018 English wheat area estimated at 1.56m/h, 108,300h lower than previously forecast. If correct, would take circa 800tmt wheat from the UK balance sheet.
English spring and winter barley areas similarly placed below previous reporting – down 4.21% and 5.52% respectively.
US freezing temps remain of concern – though snow cover is reportedly widespread.
EU/FSU winter crops in good condition – though some suggestion soil moistures are low in some Black sea regions.
UK winter cereals remain anecdotally reported in excellent condition.
USDA reporting came and went with adjustments to US/Global S&D’s more modest than anticipated.
Market attention would now appear likely to revert back to politics – more specifically, US/China talks from a Global standpoint and Brexit from a domestic one. Pace and structure of the wheat export market will also remain closely watched as US/EU seek to offload stocks, absent competitive Russian offers. UK trade may also take time to digest the new BPS data and any potential impact on the old crop balance sheet.
Expect more of the same as we progress towards spring when weather/crop development etc. should regain some of the focus. In the lead up - risk of volatility remains in light of all the geo-political context.