An up and down week which saw a fairly neutral WASDE report
published on Thursday. An embryonic weather story around dryness in the HRW
belt attracted some attention prompting some significant fund short covering.
· Firstly to the report highlights:
§
WASDE reported slightly increased World wheat
production from 757.01 to 758.25 million tonnes.
§
A decrease in global wheat ending stocks was
noted of –1.92 million at 266.10 mmt.
§
An expected increase in US exports did not
materialise (despite a weaker dollar) with Russian wheat continuing to dominate
export markets
§
The COT report as of Feb 6th showed managed
money still net short 83.4 k-ctrs of Chgo wheat, reduced from net short 96.8 k
the previous week. (Note: it’s likely this will have changed significantly
since Tues)
·
SovEcon said Russia’s Dec wheat exports were
4.15 mmt almost equaling Nov’s record 4.21 mmt. They estimated Jan exports at
2.7 mmt. Russia’s export pace will have to slow considerably to keep 2017/18
exports below 38 mmt.
·
Sterling firmed mid-week on the back of BoE
rhetoric suggesting an interest rate increase may be more likely and sooner
than previously expected.
·
India’s wheat imports are set to surge this year
as lower plantings and poor rainfall threaten output
WEATHER/CROP
DEVELOPMENT:
·
South American weather has been a factor this
week as concern over Argentinean dryness and Brazilian wetness supports the
Soybean market. The Argentina Soybean crop continues to be revised down on
ongoing dryness.
·
Some longer range forecasts today have dryness
extending into the spring and summer for most of the US Southern Plains.
·
Europe largely benign
BOTTOM LINE:
·
This week highlighted somewhat the role of funds
in the market as a “technical” rally was kick started by plains dryness and
South American weather.
·
The carnage in equities markets in general this week
was also a factor as commodities generally were caught in the tail wind.
·
This week also highlighted the ample world
supplies of grains. Expect weather focused, volatile trade as the trade looks
to better clarify likely 2018 supply.
