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Market Report 14th September 2018


Markets sell-off following bearish USDA data released on Wednesday, before consolidating somewhat late in the week. USDA headlines:

  • US corn yields place at a record 181.3b/a, far above trade expectations.

  • Russian wheat crop placed at 71mmt, up 3mmt on before and in line with the trade ranges.

  • Russian wheat exports left unchanged at 35mmt – trade estimates circa 25mmt.

  • Australian wheat production reduced by 2mmt to 20mmt, with exports also cut to 14mmt – down from 16mmt (trade estimates 11/12mmt).

  • Strategie Grains place EU corn crop at 58.4mmt, down from 61.3mmt (USDA 60.8mmt).

  • CBOT wheat has liquidated over $35/t over the last month. Currently trading at levels that make US exports competitive.

  • Some reports of African swine fever discovered in Belgium near the French border for the first time in over 38 years.

  • US funds estimated net short -83.9k (corn), -78.9k (soybeans), long 51.5k (wheat).

  • Egypt’s GASC buys 230k Russian wheat. Algeria buys 630k milling wheat (likely French origin).

WEATHER/CROP DEVELOPMENT

  • US Corn Belt harvest has begun, though rainfall is forecast across parts of the belt for the next 7-10 days. Extended forecasts also imply wetter than normal conditions to come.

  • Australian forecasts continue to look too hot/dry – particularly for eastern crop areas.

  • EU/FSU also believed to be too dry, risking planting/germination of winter crops. Russian spring wheat areas due for snow and rain however.

  • Argentinian forecast suggest wetter conditions over the next 2 weeks.

BOTTOM LINE:

  • Wednesdays WASDE offered little to shift the existing wheat market sentiment.

  • Harvesting of what is expected to be a record US corn crop has now begun. FSU wheat remains widely available to the market, whilst US funds continue to hold spec longs in wheat (though these have been reduced to an extent).

  • Trade consensus remains that Russian exports in particular should decline over time and availability should tighten - reflective of the smaller Global balance sheet this season. Debate is ongoing as to at what stage this might begin to occur.

  • Expect range-bound trade to continue with currency/politics the likely focal points, absent new fundamental input to markets.

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