Markets mixed this week as Black Sea/US weather continue to
occupy much of the trade focus.
- Private forecaster’s cut Russian wheat crop estimates. Sovecon est. down 3.9mmt to 73.1mmt. IKAR est. down 2mmt to 71.5mmt. Russian Grain Union place production at 68- 69mmt. If correct, would amount to a 21% decline on this season’s 85mmt produced.
- Ukrainian winter wheat yields estimated down 15-30% according to the state hydro meteorological centre as a result of prolonged dry weather. Ukraine’s Ag council have also suggested up to 50% of the grain crop could be lost if conditions don’t improve.
- German Farm Co-Op Association suggest wheat production will be circa 22.89mmt, down 6.5% on last year.
- Private analysts forecast Polish wheat production down 8% on last at 10.7mmt. Dry conditions have been stressing crops as in Germany.
- IGC estimate UK wheat production at 14.6mmt for 2018 (14.837mmt this season).
- External markets will be closely watched this week following a tense G7 summit at the weekend and with a further US/North Korea meeting planned. Negative outcomes for either (or re. the US/China situation) would likely add weakness to Ag markets.
- US soybeans trade falls to a 6 month low as good conditions in the US and uncertainty around Chinese demand pressure the trade lower.
- US funds estimated net short 3.7k wheat, long 124.3k (corn), 9.5k (soybeans).
WEATHER/CROP DEVELOPMENT
- · Southern Russia receives some rainfall, though showers are believed to be scattered. Extended models continue to suggest dry conditions and above average temps (though latest models imply rain chances for the next 2/3 weeks have improved marginally).
- · Ukraine receives beneficial rains in parts – though 7-10 day models suggest largely dry conditions.
- · French winter wheat crop rated 79% g/e, down 1% on the week. Corn ratings fall 7% on the week to 77% g/e following heavy rains.
- · Alberta receives good rains this week, boosting crops. Forecasts for the Canadian Prairies for the next 10 days suggest further rains are to be expected.
- · US HRW harvest continues to progress with early yield/quality reports mixed. The next 2 weeks should help clarify how the crop has performed.
- · US Corn Belt weather continues to appear benign, helping crop development and boosting yield prospects.
- · Eastern Australia forecast for better rains after an extended dry period.
BOTTOM LINE:
- · Weakness from US soybeans/corn filtered into wheat markets this week, tempering gains.
- · Black Sea weather remains the key fundamental feature for the World wheat market. Conditions for both Southern Russia and Ukraine continue to appear problematic for the next 2 weeks and whilst this remains the case, the trade will be well supported.
- · US funds have also reduced long positions in corn and soybeans significantly over the last few weeks, improving the technical outlook.
