Tuesday, 20 February 2018

Market Report 16th Feb 2018

 US grain markets close firmer, whilst EU markets close largely unchanged on the week,
as US/SA weather continue to dominate the focus.
  • Russian 12.5% protein wheat values firm to circa $200 FOB (up circa 5% since the start of Jan). US/EU wheat continue to struggle to compete.
  • US corn market continues to appear finely balanced, with strong export/ethanol/feeding demand underpinning prices and large amounts of unsold corn hanging over the trade.
  • Iraq buys 150tmt hard wheat (Australian/Canadian/US origin).
  • US funds continue to largely cover in short positions – now estimated -75,900 (CBOT SRW wheat), 15,000 (CBOT corn).
  • Strategie Grains place EU 2017/18 wheat crop at 141.7mmt, versus 141.8mmt last year.
  • US weekly corn export sales continue to grow, with 1.974mmt reported (avg. of circa 1.7mmt over the last 5 weeks). Wheat sales of 311tmt in line with market expectations.
  • ABARES increase Australia’s 2017 wheat crop estimate to 21.2mm, up from 20.3mmt prev. 


  • US Southern Plains weather continues to look dry in the extended forecasts – though some good rains are indicated for the east of the plains. US drought monitor highlights Kansas conditions to be the driest on record for the last 3 months.
  • Ag Rural report Brazil’s corn harvest to be 15% complete (29% last year). Safrinha corn planting progress seen at 46% complete versus 58% last year (41% the 5 year average).
  • Buenos Aires Grain exchange suggest 56% of Argentina’s soybean crop and 58% of their corn crop is in poor/very poor condition. Below normal rainfall and above normal temps expected for the next 2 weeks.
  • Some longer term forecasts indicate freezing conditions for some Black Sea areas. EU growing conditions continue to appear unthreatening.



  • Weather continues to hold centre stage, with ongoing concerns surrounding US/SA growingconditions prompting US funds to largely cover in short positons.
  • Global wheat fundamentals continue to be heavy and with US funds positions more balancednow following weeks of short covering, less technical support arguable exists. That said, if weather holds dry in the Southern Plains in particular, markets will likely remain well supported.
  • USDA Outlook Conference this Thurs/Fri will be closely observed, with US all-wheat and corn balance sheets due to be released. That aside, US and SA weather should continue to dominate attention.


Tuesday, 13 February 2018

Market Report 9th February 2018

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
·         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
·         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.

Wednesday, 7 February 2018

Market Review 2nd Feb 2018

US markets rally strongly as a sharp drop in winter wheat conditions helps spark fund short covering, before selling-off late in the week.
  • ·         Egypt buys 180tmt wheat, largely Russian origin. Russian cargo prices firm to new highs earlier in the week, with Saudi Arabia reportedly tendering for 715tmt wheat Apr-Jun on thurs/fri.
  • ·         US funds estimated net short 123.7k wheat, 143.5k corn. A significant reduction in position on the previous week.
  • ·         Informa estimate the Brazilian corn crop at 88mmt (USDA 95mmt). Argentine corn crop placed at 37mmt (USDA 42mmt).
  • ·         IKAR place Russian wheat exports estimate at 36.5mmt for the season – a significant slow-down in pace would be required to keep exports to this number (Sovecon 36.8mmt).
  • ·         Old crop UK wheat market remains well supportive relative to new crop, particularly further north, driven by spot consumer demand.
  • ·         Good weekly US corn export sales reported of 1.85mmt, wheat sales of 289tmt underwhelming. Corn demand continues to appear strong, though trade aware that large volumes of US corn remain unsold over the market.

  • ·         US Southern Plains remain hot and dry, with extended forecasts suggesting little respite.
  • ·         Kansas rated only 14% g/e, down 30% yoy. Oklahoma 4% g/e, down 29% and Illinois 38% g/e, down 36% on last year. 47% US wheat crop estimated to be in drought at present.
  • ·         Hot temperatures expected for Argentina for most of this week. 40% of the corn crop now estimated to be silking (BAGE). Approx. half the normal rainfall levels for the main corn producing areas has fallen this season since October.
  • ·         Brazilian forecast continue to look wet for much of this week, but extended maps suggests a return to drier conditions.

  • ·         Declining US winter wheat conditions and weather have dominated much of the focus this week, with funds believed to have reduced shorts by around a third.
  • ·         Whilst US weather stays hot and dry and SA conditions remain problematic, markets will likely look to retain risk premium – particularly with funds still heavily short wheat/corn. That said, it is still perceived to be too early for lasting damage to US HRW crops, with good rains by the end of spring likely to recover conditions significantly.
  • ·         Global wheat fundamental also continue to show a bearish bias. USDA’s latest S&D due on Thursday will by closely monitored. That aside, expect the US/SA weather outlook to help shape direction day-to-day.

Tuesday, 30 January 2018

January 2018 Update

January 2018 Update

January 30, 2018. Mike Temple

January has seen a firming in spot value of feed wheat; £145-147/t (depending on location) is quite easily achievable. This is purely down to buyer’s taking cover hand-to-mouth as there is very little carry further forward in the market. The inflated spot feed market is also highlighted by a disconnect between physical and futures markets; May’18 London wheat futures are currently trading at £139/t. In the last couple of months the futures market has dropped by around £10/t whereas the spot value for physical wheat remains relatively stable and looks likely to remain that way for the next month.
Oilseed Rape (OSR) has been the whipping-boy of the last couple of months with spot-values currently around £293/t, a drop of over £30/t from the highs seen in early November. It is difficult to say exactly what has caused this drop-off with very few sellers at these recent levels; there has been talk of imported Australian canola coupled with increased imports of Argentine bio-diesel, but nothing certain. The pertinent point however is that there is still at least another five months until there is any new crop OSR available in the UK, and given the inherent volatility of the OSR market, you would like to think there would an upside swing at some point.

Imported ammonium nitrate (AN) continues to offer good value against UK, with at least a £10/t differential between the two. It would be hoped that with the recent strengthening of the pound imported AN and compound will remain competitive. 

Friday, 5 January 2018

Market Review 22nd Dec 2017


US markets consolidate somewhat above recent lows this week, with fundamental news relatively thin.

  • DEFRA reduce UK wheat crop estimate to 14.8mmt for 2017 (down from 15.163mmt prev.) This represents a 5% increase on 2016.
  • Scottish Gov. reduce 2017 wheat production to 889tmt, down 41tmt on prev.
  • German winter wheat area down 4.7% according to the German statistics authority.
  • US funds estimated net short 250.3k corn, 163.9k wheat.
  • India is reportedly considering raising the 20% import tax on wheat to further encourage an increase in the domestic wheat area.
  • Sovecon increase Russian wheat exports estimate to 35.5mmt, up 500tmt on prev. Russia’s Deputy AgSec suggests that 40mmt would be achievable based on the current pace of exports.
  • Parts of Argentina receive rains over the last week, though areas missed include Buenos Aires, Santa Fe and La Pampa. Foreword forecast appear to indicate hotter, drier conditions are set to continue for a number of areas.
  • Freezing temperatures are affecting much of Mid North America, though there’s now snow cover in place in parts of Nebraska and Kansas. Little winterkill is thought likely at present.
  • Argentina’s BA exchange report wheat harvest now 72.5% complete, up 14% on the week.

Quiet news week, with low volumes traded indicative of the holiday period.
Short term, the focus may be around the extent of any US fund short covering in advance of the New Year, given the large shorts in wheat/corn. Ample Global grain supplies continue to restrict upside.
12th Jan USDA report is the next major fundamental marker for the trade – expect range bound trade in the lead up, failing sharp weather developments/fund short covering.

Wednesday, 20 December 2017

Decmeber 2017 Update

December 20, 2017
December can often see a firming in spot trade with farmers reticent to sell. Cash-flows bolstered by the arrival of the single farm payment coupled to farms shutting down for Christmas from mid-December onwards make it a hard month to buy, often leading to a short rally. Whilst the closure of the Vivergo plant at Hull has taken some of the steam out of the market, there are still plenty of buyer’s in the market; however this is yet to translate into any meaningful increase in values. December old crop continues to trade at £143-145/t depending on location, with a carry of £1/t/month further on. It would be hoped that buying-demand in January may lift the market but at present the atmosphere is as dull as dishwater.
New crop provides a much more compelling argument; values have drifted over the last month and now sit at roughly £142 for November’18 and £137 for harvest. Wheat crops in the north are variable, with those drilled in wet and cold conditions or following potatoes looking a little thin. Over the last four years the world has produced four big grain crops, with Russia setting a new record for its own grain production each year. With this in mind, it could be argued that one of the big producers is due a poor crop sometime soon. Furthermore, if domestically we do not produce more grain next than this, it is hard to argue why values should be much lower than they are at present. Ultimately though, currency will likely be the greatest influencer with the relative strength of the pound managing the risk of imports.
Despite the perceived flatness of the wheat market, wheat in the north continues to trade at a substantial premium to the rest of the country. This is certainly worth bearing in mind when looking at low-grade milling premiums, which are often negligible. The delivered value of wheat to Ensus is virtually the same as into most Yorkshire mills for all but full-spec milling wheat. Therefore it is prudent to double-check the feed market before trading a ‘premium’ and opening the door to claims you may have otherwise avoided.
Feed barley is still trading relatively horizontally at £128-130/t for January; again this seems to have found a comfortable level and, given the poor export market for feed barley, is unlikely to fluctuate.  OSR (Oilseed Rape) has had a fairly torrid time over the last few weeks; the French recently reported that OSR plantings are up 9.5% year-on-year, leading to a further reduction in values. A slight recovery in the value of the pound has led spot OSR values to fall to around £308/t for December. Very little OSR has traded in recent weeks since values fell from £325 spot. Given the time remaining until the next harvest, and the volatile nature of the OSR market, most growers will be happy to sit and watch in the hope there will be another £10-15/t rally.
Early December saw a rapid reduction in the value of Urea, with the most competitive importer putting the product onto farm at £250/t for January, almost at parity with UK AN at £247/t on the same terms. Imported AN looks a much better buy against UK at the moment with a £15/t spread between the two. A recent sharp upturn in the price of natural gas will most likely see all suppliers move prices upwards as the cost of production increases.

Market Review 20th December 2017

Markets continue to trade sideways as the USDA reiterate bearish World wheat fundamentals once more.

• USDA increase world wheat crop to a record 755mmt, up 1.5mmt on last season. Stocks of 268mmt also a new record.
• Informa place US winter wheat plantings estimate at 31.1.m/a, down from 31.9m/a (32.7m/a last season). Of that, the HRW area is expected down 5% on last year.
• AgRural suggest Brazilian corn harvest this year will reach just 84.1mmt, down from last year’s 97.6mmt (USDA Dec est. 95mmt).
• Kazakhstan’s Ag Ministry cut their wheat export estimates by 1mmt for the season to 8mmt, citing increased competition from Russian exports.
• Russian Ag Minister suggests wheat exports could reach up to 40mmt this season (USDA est. 33.5mmt).
• France AgriMer reduce wheat export expectations to 9.5mmt, down 400k. Figure continues to appear high, with French supplies uncompetitive relative to Black Sea grain.
Egypt buys 295k wheat, largely Russian origin. Brazil and Russia have agreed terms for importing Russian wheat, though this is not believed likely given the availability of cheaper Argentine supplies.
• US funds estimated net short 163.2k wheat, 237.2k corn.

Dryness in the US Southern Plains remains closely monitored, particularly for any sign of colder temperatures and the potential for winterkill. 24% of the country has received insufficient rain. Some rains are forecast for the next 2 weeks, though not to greatly above average levels.
The La Nina weather pattern, if sustained, could keep the Southern half of the US dry going forward.
Argentina forecast for some rains, though more will be required to help mitigate the recent dry period if crop losses are to be avoided.
French farm ministry place winter wheat crops condition at 95% g/e

Little supportive to be found in USDA’s report on Tuesday, with abundant supplies of wheat and corn further illustrated.
South American dryness remains cause for concern. Likewise lack of rain for the US Southern Plains and potential for winterkill will be closely monitored - particularly in light of the smaller wheat area.
In light of the size of the US fund shorts in corn/wheat and the proximity to year/month end - short covering remains a possibility over the coming weeks. Though markets may struggle to sustain any rallies, absent supportive developments.
Expect the range bound trade to continue as we move towards the festive period.