Tuesday, 22 May 2018

Market Report 18th May 2018

Markets bounce this week following the recent sell-off. Easing of US/China trade tensions combined with resumed new crop supply concerns, act as catalysts.
  • ·         US/China announce intention to put trade tariffs on hold – news supportive to US corn/soybeans markets with increased imports of both to China reportedly being discussed.
  • ·         US funds estimated net short 17.1k wheat, long 228.8k (corn) 71.5k (soybeans).
  • ·         SAFRAS estimate Brazil’s total corn crop for 2018 at 79mmt, down from 88.9mmt last year (USDA’s May estimate 87mmt).
  • ·         Euro continues to weaken versus the dollar, supporting matif wheat (now at 7 month lows). Sterling firms on employment/wage growth data released.
  • ·         US weekly export sales of 985k (corn) 195k (wheat) - further illustrating the lack of demand for US wheat at current levels.

  • ·         US HRW forecast return to drier conditions after showers last week. Forward forecasts at present suggest below normal rainfall for much of the Southern Plains.
  • ·         US Corn planting believed to be circa 75% complete, marginally behind the average for this time of year. Forecast suggested scattered light showers in parts.
  • ·         Canadian Prairie’s remain largely dry, though Western areas may receive some rainfall this week.
  • ·         Southern Ukraine/Russia remain dry but are forecast for some rains. Russian spring wheat plantings continue to progress slowly, though better conditions forecast for the next 2 weeks should boost progress.
  • ·         Australia continues to appear largely dry in the extended forecast (some rains expected for coastal areas). ABARES suggest producers are delaying plantings, hoping for better soil conditions.
  • ·         EU crop conditions largely unthreatening after better rains last week. Forward forecasts also imply more normal conditions for this time of year.
  • ·         France AgriMer suggest corn planting progress at 86% complete

  • ·         Markets consolidate following on from the circa 50c sell-off in CBOT wheat of the last few weeks, with weather/politics supporting the rally. Weather continues to principally dictate direction and in spite of improved weather outlooks in some areas of concern, issues in some parts of Aus/Can/FSU/US remain unresolved.
  • ·         That said, old crop Global wheat stocks are burdensome and US funds have significantly reduced shorts in wheat, also building a significant long in corn - removing some underlying technical support.
  • ·         Expect volatile trade to persist, as the weather outlook continues to occupy much of focus. Geo-political/currency influence will also remain closely monitored, particularly until there is more clarity around what the US/China situation will ultimately mean for Ag S&D’s.