Market Report 15th February 2019

February 18, 2019

Markets sharply lower this week as negative sentiment around US/China trade talks and news of aggressively cheap French export business weighs heavy.

  • US/China negotiations continue to cause Ag market volatility. Markets sold off midweek basis the two sides were still some distance apart with the deadline looming. Then indications late in the week from the President were that a 60 day extension may be granted to avoid the tariff hike on 1st March if sufficient progress has been reached, providing some support.

  • Matif under pressure as a result of sharply lower French wheat pricing to Tunisia/Algeria. 600tmt export business with Algeria at circa $247 FOB ($25 below US offers and $6 below Wednesday’s business to Tunisia).

  • Suggests EU shippers are starting to come under pressure to move more significant volume before it gets too close to next season. Wheat exports to NonEU countries still down circa 20% y/o/y.

  • Some speculation that India may become an importer of corn as a result of drought conditions, damaging this years crop (estimated down 20%).

  • US funds estimated net long 35k (corn), short -28k (wheat) and -25k (soybeans).

  • US weekly export sales reporting still not up to date following the Government shutdown. Sales for w.e. 3 rd Jan reported at 460k (corn) 131k (wheat).

  • UK trade data released this week shows domestic wheat usage declining Oct-Dec18 with maize imports increasing. Wheat imports reported at 1.17mmt to December.

WEATHER/CROP DEVELOPMENT

  • Good EU/FSU crop conditions continue to point to a large rebound in production next season.

  • Similarly UK winter wheat expected to rebound in production with crop conditions excellent and plantings higher than last season.

BOTTOM LINE:

  • Negative sentiment this week as US/China politics and then aggressive French exports act as catalysts for the sell-off.

  • Expect the major themes to remain the same as we progress towards spring with EU markets focused on old crop export dynamics, US on China trade talks and UK on Brexit developments.

  • Absence of any major weather issue globally or domestically continues to undermine values, whilst technically there may also be risk of follow through selling, after last week’s break lower. Regardless, expect volatile trading conditions to remain with markets so politically charged.

     

     

     

     

     

     

     

     

     

 

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