Markets largely lower on the week, as US weather dominates the focus.
- US funds estimated net short 63.3k wheat, long 147.9k (corn) 143.5k (soybeans).
- Strong US weekly corn export sales reported at 1.092mmt, with 240k new crop wheat sales and 67k old crop cancellations reported (further reemphasising the lack of US competitiveness).
- China continues to auction off state reserves of corn, with another 5.6mmt sold this week. Now 11.8mmt in total for the last few weeks, with a further 7mmt due to be auctioned this coming week.
- Tunisia buys 3 old crop, 2 new crop wheat cargoes this week. French/Black Sea origin. Iraq buys 100k wheat, Australian origin.
- Strategie Grains place EU soft wheat crop at 141mmt for 2018 (141.7mmt this season). Old crop exports reduced to 20.3mmt from 21.2mmt (24.2mmt last year).
- Sterling weakness supportive to London wheat last week, as attention returns to Brexit negotiations and a BOE rate hike in May is cast into doubt.
- French old crop wheat cash premiums ease, despite ongoing rail strikes, as demand begins to slow.
WEATHER/CROP DEVELOPMENT
- US HRW crop forecast for some rain over the next 10 days. Dryness continues to be a significant issue, hence, rainfall levels will be monitored closely.
- US winter wheat rated 31% g/e (up 1% on the week) - though poor/very poor increased by 2% to 37%.
- Improved US Corn Belt forecast suggest good progress should be achieved this week. Estimated to be circa 5% planted to date (13% average for this time of year).
- Safrinha corn area in Brazil remains dry, with forecasts indicating little rainfall
- French winter wheat reported at 77% good/excellent Warm temps and limited moisture have been boosting spring progress for many parts of the EU.
- FSU conditions remain good, with forecast unthreatening for the next few weeks.
- Canadian Prairies and US Northern Plains remain snow covered following recent storms, delaying plantings. It’s not believed to be critically late at this stage however.
BOTTOM LINE:
- Weather continues to principally shape direction, as US HRW dryness and Corn Belt Planting delays occupy much of the trade focus. Improved weather outlook for both instigated the sell-off last week. Perception remains that if US HRW remains the only crop issue this season, markets will struggle to justify current levels.
- That said, markets will trade the story and if Southern Plains dryness persists and Corn-Belt planting delays are exacerbated, then expect markets to remain underpinned.
- In short, weather led volatility should be the theme of the next few weeks, with all eyes on US conditions in particular. Geo-politics/currency will continue to be monitored closely however.
