Market Review 11th Dec 2017

 US wheat markets fall sharply to make new contract lows once more, as Global supplies weigh heavy.

ABARES place Australian wheat production at 20.3mmt (USDA 21.5mmt).

Stats Canada place wheat production at 30mmt (circa 2mmt above trade estimates). USDA estimate 27mmt.

• US wheat exports circa 7% down on last year, whilst EU exports are down around 22%, as Black Sea supplies continue to dominate.
• US funds estimated net short 203k corn, 145k wheat.
• IKAR raise Russian wheat export estimate from 34mmt to 35.3mmt for the season (Russia report a record month for grain shipments in November).
• Sovecon raise Russian wheat crop estimate to 84.2mmt (USDA 83mmt).
• Sterling fluctuates this week before closing firmer, as agreement appears closer on the Brexit ‘Divorce Bill’. Further strength will continue to put pressure on London wheat.
• Coceral place UK wheat crop at 15mmt (DEFRA 15.2mmt). Trade estimate range from 14.5-14.8mmt. 2017 EU wheat crop (including durum) placed at 151.1mmt (5.9mmt up on last season).
•  Much conjecture remains around the size of the UK surplus, particularly in light of the Vivergo closure.

 

WEATHER/CROP DEVELOPMENT

US HRW forecast appear dry in the 7-10 day models. Southern Plains dryness will continue to be monitored closely by the trade – though it’s thought to be too early for any lasting damage at present.

Argentine dryness continues to be a problem, with only scattered rains over the last week.

Though this is perceived to be more a corn/soybean, than wheat related issue.

Concerns around a developing La Nina pattern for South America continue - suggesting a greater chance for prolonged dryness.

BOTTOM LINE:

Weakness in US wheat has set the tone this week, after five days of consecutive losses driving prices to new contract lows in both CBOT and KS.

Difficult to see the catalyst for a rally at present, other than fund short covering in advance of year end, with markets appearing unwilling to focus on crop 18 production as of yet.

USDA data due tomorrow will be the focus, through historically the January report is often more significant. In light of the above, it appears likely any rallies will continue to be viewed as selling opportunities.