Mid-week market report - 15th May 2019

The USDA's first stab at 2019/20 world wheat and corn balance sheets last Friday indicated a boost of supplies and extended the recent weak price trend. Early this week, French and London wheat futures hit new contract lows as markets reacted to the USDA forecasts for record world wheat and corn crops next season; put at 777 million tonnes and 1,177 million tonnes respectively.

Approximately a third of the world's corn is supplied from the US. The USDA sees the US planted corn area increasing by 3.7 million acres this spring, a yield on par with last year and a crop 15 million tonnes higher at 381 million tonnes. Expecting this, the speculative funds have built record short positions in US corn futures markets, hoping to profit from falling prices.

However, excessive rainfall has continued to plague the US Midwest, hampering farmers in their corn drilling progress. Crops not planted by mid-May lose yield potential and, on Monday evening, the USDA published its weekly crop progress report which highlighted how behind the seeding is. Total US corn planted as of last Sunday was seen at only 30% – well behind last year's 59% and the five-year average of 66%. Some states have more significant issues, for example, Illinois had only 11% planted versus the five-year average of 82%.

This situation could have a major impact on US corn yields and, as a result, we have seen some short covering on US markets. CBOT futures have rallied over 6% and helped to lift London wheat futures £4 per tonne from their Monday low.

It is worth noting that parts of Russia are hot and dry but at this stage this is not seen as damaging.

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