Market Report 26th April 2019
Markets largely unchanged on the week as US wheat and corn hits new contract lows.
US/China meeting scheduled for Wednesday this week will be closely monitored for any developments re. a trade agreement. Some suggestion a deal is nearing from US officials.
Russian FOB values down $10/t on the week as the old crop market begins to align more with the new crop.
IGC increase their 19/20 Russian wheat crop estimate by 2.4mmt to 79.5mmt (IKAR 80.1mmt
EU commission increase old crop wheat exports estimate by 2mmt to 21mmt. Exports have picked up sharply in the last few months as EU shippers seek to clear stores.
Stats Canada place wheat area at 25.7m/a, a 4% increase year on year. Above trade expectations.
US funds estimated net short -345k (corn), -134k (soybeans), -130k (kc +ch wheat),
US weekly export sales largely routine. 780tmt (corn), 425k (wheat) in line with trade targets.
Financial/political turmoil in Argentina weakened the peso 8% in 2 days last week. Weaker currency reportedly encouraging Argentine growers to sell corn in volume.
WEATHER/CROP DEVELOPMENT
US Corn Belt forecast for wet weather over the next 2 weeks, with temps also expected to be below normal. Only circa 18% planted to date, so these conditions are expected to delay planting progress further.
US wheat ratings currently 60% g/e, compared with 30% g/e this time last year.
French soft wheat crop ratings reduced by 2% to 79% g/e. This is still reasonable historically however.
ABARES report conditions in Eastern Australia extremely dry with very limited rain expected in the forecast. Wheat seeding is due to start, so situation will be closely monitored.
BOTTOM LINE:
Current private projections indicate large increases in production for Russia, US HRW, EU and now Canada following the Stats Canada data last week. In short, absent a major issue in one of these or another key growing region, the case for a sustained wheat rally Globally is thin.
Similarly, although dry in parts of the south, UK wheat production is expected to rebound next season with crops in largely good condition. Brexit developments clearly remain key, though scenarios which greatly benefit London Futures are difficult to isolate.
Weather is the predominant trade focus at present and currently, there is little of serious concern in the Northern Hemisphere – hence the current market weakness. Expect this to persist until either weather deteriorates or external markets pressures intervene.