Tuesday, 19 December 2017

Market Review 19th Dec 2017

   Markets continue to trade sideways as the USDA reiterate bearish World wheat fundamentals once more.
  • USDA increase world wheat crop to a record 755mmt, up 1.5mmt on last season. Stocks of 268mmt also a new record.
  • Informa place US winter wheat plantings estimate at 31.1.m/a, down from 31.9m/a (32.7m/a last season). Of that, the HRW area is expected down 5% on last year.
  • AgRural suggest Brazilian corn harvest this year will reach just 84.1mmt, down from last year’s 97.6mmt (USDA Dec est. 95mmt).
  • Kazakhstan’s Ag Ministry cut their wheat export estimates by 1mmt for the season to 8mmt, citing increased competition from Russian exports.
  • Russian Ag Minister suggests wheat exports could reach up to 40mmt this season (USDA est. 33.5mmt).
  • France AgriMer reduce wheat export expectations to 9.5mmt, down 400k. Figure continues to appear high, with French supplies uncompetitive relative to Black Sea grain.
  • Egypt buys 295k wheat, largely Russian origin. Brazil and Russia have agreed terms for importing Russian wheat, though this is not believed likely given the availability of cheaper Argentine supplies.
  • US funds estimated net short 163.2k wheat, 237.2k corn

  • Dryness in the US Southern Plains remains closely monitored, particularly for any sign of colder temperatures and the potential for winterkill. 24% of the country has received insufficient rain. Some rains are forecast for the next 2 weeks, though not to greatly above average levels.
  • The La Nina weather pattern, if sustained, could keep the Southern half of the US dry going forward.
  • Argentina forecast for some rains, though more will be required to help mitigate the recent dry period if crop losses are to be avoided.
  • French farm ministry place winter wheat crops condition at 95% g/e

  • Little supportive to be found in USDA’s report on Tuesday, with abundant supplies of wheat and corn further illustrated.
  • South American dryness remains cause for concern. Likewise lack of rain for the US Southern Plains and potential for winterkill will be closely monitored - particularly in light of the smaller wheat area.
  • In light of the size of the US fund shorts in corn/wheat and the proximity to year/month end - short covering remains a possibility over the coming weeks. Though markets may struggle to sustain any rallies, absent supportive developments.
  • Expect the range bound trade to continue as we move towards the festive period