Frontier Agriculture
Member
World markets
Chicago wheat traded lower through most of the session yesterday before closing slightly higher. The USDA report reduced world wheat end stocks despite a production increase. However, a reduction in US corn yields was expected and this did not happen. US corn yield was increased from 169.5 to 169.9 bushels/acre with the area left unchanged. Overall, this was a bearish USDA for grains.
The USDA report left US supply and demand unchanged but there was an overall increase to world wheat production, up 1.67 million mt to 744.85 million mt. It was expected that there would be a significant increase in Russian production This was confirmed up 3.5 million mt to 81 million mt with exports at 32.5 million mt, up 1 million. This is at the top end of what the trade considers to be logistically possible for Russia to ship in a season. Some of the Russian increase was offset by a drop in Australian production, down 1 million to 22.5 million mt (ABARES at 21.5 million mt). EU wheat production was also lower at 148.87 million mt and EU wheat exports were reduced by 1 million to 28.5 million mt.
Overall, despite the increase in global production, a combination of a smaller carry in (mainly due to revisions to the Australian wheat carry in) and increased global consumption resulted in a reduction in global wheat ending stocks down by 1.55 million to 263.14 million mt.
UK wheat
London wheat closed £0.10/t lower yesterday with sterling 1% higher on the day. Stronger sterling is making imports cheaper into the UK and at the moment consumer demand is outstripping the pace of farmer selling.
Milling premiums are starting to narrow, particularly in the north where strong feed demand is already starting to squeeze premiums. We have had a harvest of varying qualities but overall all it looks as though there is sufficient group 1 milling wheat to satisfy demand.
OSR market
Yesterday’s USDA was probably more bearish than expected. However, the market seemed less shocked both by increases in yield (49.9b/a) and US ending stocks being increased to 475myn bushel (13myn mt). Chicago initially traded lower by a few cents before getting heavily sold off but had recovered some way by the close.
With the announcement of this USDA and last week’s news on Argentine SME flows, the bearish flashpoints are now largely behind us. While it’s true local prices have fallen, this has been as much a consequence of US dollar’s weakness against sterling and the euro as a result of these fundamental events.
Attention will now turn to planting conditions in South America and canola production in Canada and Australia.
Chicago wheat traded lower through most of the session yesterday before closing slightly higher. The USDA report reduced world wheat end stocks despite a production increase. However, a reduction in US corn yields was expected and this did not happen. US corn yield was increased from 169.5 to 169.9 bushels/acre with the area left unchanged. Overall, this was a bearish USDA for grains.
The USDA report left US supply and demand unchanged but there was an overall increase to world wheat production, up 1.67 million mt to 744.85 million mt. It was expected that there would be a significant increase in Russian production This was confirmed up 3.5 million mt to 81 million mt with exports at 32.5 million mt, up 1 million. This is at the top end of what the trade considers to be logistically possible for Russia to ship in a season. Some of the Russian increase was offset by a drop in Australian production, down 1 million to 22.5 million mt (ABARES at 21.5 million mt). EU wheat production was also lower at 148.87 million mt and EU wheat exports were reduced by 1 million to 28.5 million mt.
Overall, despite the increase in global production, a combination of a smaller carry in (mainly due to revisions to the Australian wheat carry in) and increased global consumption resulted in a reduction in global wheat ending stocks down by 1.55 million to 263.14 million mt.
UK wheat
London wheat closed £0.10/t lower yesterday with sterling 1% higher on the day. Stronger sterling is making imports cheaper into the UK and at the moment consumer demand is outstripping the pace of farmer selling.
Milling premiums are starting to narrow, particularly in the north where strong feed demand is already starting to squeeze premiums. We have had a harvest of varying qualities but overall all it looks as though there is sufficient group 1 milling wheat to satisfy demand.
OSR market
Yesterday’s USDA was probably more bearish than expected. However, the market seemed less shocked both by increases in yield (49.9b/a) and US ending stocks being increased to 475myn bushel (13myn mt). Chicago initially traded lower by a few cents before getting heavily sold off but had recovered some way by the close.
With the announcement of this USDA and last week’s news on Argentine SME flows, the bearish flashpoints are now largely behind us. While it’s true local prices have fallen, this has been as much a consequence of US dollar’s weakness against sterling and the euro as a result of these fundamental events.
Attention will now turn to planting conditions in South America and canola production in Canada and Australia.