Market Report 5th July 2019
Markets sharply lower on the week as US/EU forecasts moderate.
US weekly export sales. Corn (332tmt), Wheat (276tmt), Soybeans (867tmt). Corn sales well below needed levels to reach USDA estimates.
US funds estimated net long 178k (corn), 12k (wheat), short -37k (soybeans). IKAR suggests Russian wheat quality very good, though yields have been variable. Proteins in particular are unusually high.
Sovecon reduce Russian wheat crop estimate by 5.6mmt to 76.6mmt. Still 7/8mmt larger than last seasons crop however. Reports in Ukraine suggest the wheat crop would normally be 60% milling, 40% feed. This year is closer to 80% milling quality.
US/China trade war rumbles on, though rhetoric somewhat improved after the recent G20 meeting. Political commentary still suggests both sides are no nearer an agreement however.
UK physical trade thin, though with harvest beginning in the South, premiums may begin to come under pressure as new crop supplies become available
Weather/Crop Developments
US wheat harvest continues with yield reports good. US Corn Belt weather mild for the next 2 weeks, boosting crop prospects. Conditions raised 1% on the week to 57% g/e.
Argentine corn harvest remains behind normal, 49% complete versus 60% average for this time of year.
France AgriMer place soft wheat conditions at 75% g/e, down 5% on the week following on from the extreme recent heat(still represents a 4 year high however).
Southern Russian weather appears to be moderating, with forecasts cooler and wetter.
West Australia benefit from good rains.
Bottom Line
In short, little story around wheat in isolation at present with official estimates suggestive of plentiful supply next season, both domestically and Globally. As such, wheat remains reliant on a US corn issue to raise world feeding values.
Benign US Corn Belt forecast for the next few weeks combined with growing US/EU/UK wheat harvest pressure would suggest further weakness near term. USDA reporting this Thursday will provide some focus, though failing a bullish surprise or significant change in forecasts, markets may struggle to sustain any rallies.