- Ag markets are higher in Chicago, with wheat recovering all of Thursday’s loss and more. Grain futures on Thursday were oversold, and US Gulf wheat is now highly competitive in the world market. Note that a full 8 months of wheat’s international trade year remain. EU wheat futures in Paris are up €3/mt.
- Cargill this morning offered Egypt two cargoes of US SRW at $219/mt, the cheapest of all wheat offered to Egypt. Ultimately Egypt is likely to buy Russian/Eastern European based on cheaper freight. But, this is a sign that the US will now compete for non-traditional destinations moving forward, particularly below $5.20, basis spot Chicago futures. Interior Russian prices will be updated later today. And we mention the EU/Black Sea forecast has trended steadily drier this week. Rainfall across Ukraine and Southern Russia will total just 20-40% of normal into November 10.
- This morning’s meeting between Russian official and exports was rather brief and lacking in fireworks. Russian wheat shipments will be ongoing, but it is likely the USDA’s export forecast of 35 million mt is 1-2 million too high. The Russian government will monitor quality and exports closely moving forward. This is just more of the same, but the market is acting to reallocate world market share amid unchanged Black Sea fob offers and falling EU/US prices.
- We estimate that this morning managed funds’ position in Kansas/Chicago wheat combined was a net short 35,000 contracts. Funds’ combined Kansas/Chicago position hasn’t been net short since April. There is also more talk of disappointing corn yields, which in pockets of the Central US have failed to exceed last year.
- The GFS weather forecast is wetter across the Southern and Eastern Midwest over the next 5-7 days. Rainfall coverage late next week has been expanded to include E KS, MO and the whole of IL, with totals there pegged in a range of 1-2”. Heavier totals will favour KY, IN and OH. This won’t be a major issue for national harvest progress, but it is unlikely that the E Midwest will finish harvesting corn/beans prior to the first week of November. Light snow is forecast is N IL, WI and MI, but confidence in this is low. Drier weather follows Nov 5-10.
- The wheat market since late summer has been disappointed by routine US export sales and the lack of any move by Russia’s government to really slow down shipments. It is our thesis that the world cash market will simply favour US wheat during the second half of the 18/19 campaign.
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Weekend summary 26 October 2018
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