Markets close mixed, with USDA data largely in line with expectations. Post report, US HRW rain prospects and Corn-Belt planting weather resumed much of the focus.
- USDA increase 2017/18 World wheat production by 0.96mmt to 759.75mmt (a new record). World wheat stocks increased by 2.33mmt to 271.22mmt (trade est. 268mmt).
- USDA reduce Argentine corn production by 3mmt to 33mmt, with Brazilian output reduced by 2.5mmt to 92.5mmt (largely in line with trade - though some private estimates still suggest more downgrades may be required).
- US funds estimated net short 75.2k wheat, long 199k (corn) and 143k (soybeans).
- Russian 12.5% protein wheat prices firm to $214 FOB, due largely to Rouble weakness (up $5/t on the week).
- IKAR increase Russian wheat export estimate to 39.5mmt for the season (USDA 38.5mmt).
- France AgriMer cut wheat ending stocks by 500tmt to 2.7mmt (higher usage and intraEU exports cited).
- Sterling firms on the week against Euro, supported, in part, by increased confidence in a BOE interest rate hike in May.
WEATHER/CROP DEVELOPMENT:
- Above normal rainfall expected to hit the majority of the HRW in the second half of this week, potentially boosting crops.
- US wheat ratings lower on the week, now 30% good/excellent, 35% poor/very poor (32% g/e and 30% p/vp previously).
- US corn planting progress continues to be slow with trade estimates around 5% complete. Forecasts for the next 2 weeks suggest the cold, wet weather is set to continue, likely further delaying plantings. Circa 35% would be planted by 1st May in a normal year.
- Northern Plains continue to suffer from cold conditions with heavy snowfall in areas.
- Ukrainian/Russian spring plantings behind normal, though a drier week last week and limited rainfall expected this week should help improve planting progress.
- Canadian Prairies forecast for cold/wet conditions over the next few weeks, likely hindering planting progress.
- Cold, wet conditions persist across much of the UK, increasing yield and quality risks for both winter and spring crops as field work is further delayed. Increasingly important that hotter, drier forecasts for the second half of this week materialise.
BOTTOM LINE:
- Routine USDA data released on Tuesday does little to change the broader outlook, as markets quickly returned to trading weather (predominantly US). Forecasts for widespread rains across the HRW-Belt continues to add pressure to wheat markets, whilst plentiful Global stocks of old crop wheat/corn continue to hang over the trade.
- Sentiment remains that another major production issue in one of the Worlds key growing areas will be needed to justify a sustained rally from this point. Expect US/SA weather to largely shape direction day-to-day, though with ongoing geo-political issues in Syria/US/China – risk remains that external markets weigh into commodities, if any of these situations were to escalate.
