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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.

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