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Market Report 31st May 2019

Markets rally sharply early in the week, led by the US , before selling off, following US political developments

  • US markets weaken on suggestion of new taxes on Mexican goods. Fear there may be consequences on US Ag imports to Mexico by retaliation. Circa 15mmt corn imported annually.

  • US funds estimated net short -23k corn, -130k soybeans, -65k wheat. Massive corn short covering evident over the last 2 weeks - given position was origionally circa -300k short.

  • Brexit developments - specifically around the Conservative leadership race - drives Sterling lower, boosting London wheat as a No Deal Brexit scenario becomes more likely.

  • DEFRA confirm UK 2018 wheat harvest at 13.6mmt, down 1.2mmt on 2017, down 8.6%. Winter barley and spring barley production were down 11% and 7.9% respectively, with oats down 2.8%.

Weather/Crop Developments

  • US Corn Belt weather remains problematic, with rains In the forecast and over 30% of the planned area unplanted as of the moment. Current estimates point to a 10m/a reduction in US corn area.

  • Wetter than normal conditions for US HRW and SRW is also concerning and increasing likelihood of disease issues.

  • Conversely, hot and dry forecasts for Russia/Black Sea regions are being closely monitored.

Bottom Line

  • US Corn Belt weather and politics the focus this week leading to extremely choppy trading conditions.

  • Wheat production concerns are growing in the US and FSU but as of the moment, wheat fundamentals still point to ample Global supplies next season. The current rally is still predominately corn led - suggestive of heightened risk of correction if weather moderates.

  • In short, whilst US conditions stay problematic, markets will remain well underpinned. Further volatility into the summer would seem likely given all the politics surrounding this weather market

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