US markets rally strongly as a sharp drop in winter wheat conditions helps spark fund short covering, before selling-off late in the week.
- · Egypt buys 180tmt wheat, largely Russian origin. Russian cargo prices firm to new highs earlier in the week, with Saudi Arabia reportedly tendering for 715tmt wheat Apr-Jun on thurs/fri.
- · US funds estimated net short 123.7k wheat, 143.5k corn. A significant reduction in position on the previous week.
- · Informa estimate the Brazilian corn crop at 88mmt (USDA 95mmt). Argentine corn crop placed at 37mmt (USDA 42mmt).
- · IKAR place Russian wheat exports estimate at 36.5mmt for the season – a significant slow-down in pace would be required to keep exports to this number (Sovecon 36.8mmt).
- · Old crop UK wheat market remains well supportive relative to new crop, particularly further north, driven by spot consumer demand.
- · Good weekly US corn export sales reported of 1.85mmt, wheat sales of 289tmt underwhelming. Corn demand continues to appear strong, though trade aware that large volumes of US corn remain unsold over the market.
- · US Southern Plains remain hot and dry, with extended forecasts suggesting little respite.
- · Kansas rated only 14% g/e, down 30% yoy. Oklahoma 4% g/e, down 29% and Illinois 38% g/e, down 36% on last year. 47% US wheat crop estimated to be in drought at present.
- · Hot temperatures expected for Argentina for most of this week. 40% of the corn crop now estimated to be silking (BAGE). Approx. half the normal rainfall levels for the main corn producing areas has fallen this season since October.
- · Brazilian forecast continue to look wet for much of this week, but extended maps suggests a return to drier conditions.
- · Declining US winter wheat conditions and weather have dominated much of the focus this week, with funds believed to have reduced shorts by around a third.
- · Whilst US weather stays hot and dry and SA conditions remain problematic, markets will likely look to retain risk premium – particularly with funds still heavily short wheat/corn. That said, it is still perceived to be too early for lasting damage to US HRW crops, with good rains by the end of spring likely to recover conditions significantly.
- · Global wheat fundamental also continue to show a bearish bias. USDA’s latest S&D due on Thursday will by closely monitored. That aside, expect the US/SA weather outlook to help shape direction day-to-day.