Daily market report
18th January 2018
After starting the week with sharp losses, US wheat closed higher yesterday supported by gains in corn and a weaker US dollar which hit its lowest level since December 2014 yesterday. Dry conditions are still apparent in the plains and this dry weather pattern is forecast to continue into February. Although the USDA raised winter wheat plantings in last Friday’s report it is the weather that makes the crop and with soil moistures declining this is not a serious flag yet. Funds remain heavily short showing that they still anticipate downside in wheat. This opens the door to a short covering boost if weather conditions become a stronger concern into the spring.
Russia’s agriculture minister has raised their export estimate to 45-47 million mt. Favourable weather has continued through the winter and this is helping them get more wheat to ports. With Russia exporting at such a pace it puts more pressure on the EU whose exports have been running very slowly this season and where a build of stock looks likely by the end of the year if exports don’t pick up. Yesterday Matif wheat futures hit contract lows for the fourth consecutive day but they did bounce back to close higher on the day.
London wheat closed fractionally higher yesterday. It was a quiet day for UK trade with many growers at LAMMA.
Markets remain under pressure and UK values are still a good £10/t away from competing in export markets.
Vegetable oil markets may remain under pressure for the short term as the EU Parliament today voted to phase out usage of palm oil imports for biofuel by 2021, as well as capping crop-based biofuels at 2017 consumption levels. This is seen largely negative to vegetable oils in the short term however, it may give support longer term to rapeseed oil which will see small increases in demand.
Sterling has climbed above 1.13 against the euro and 1.2830 against the US dollar, which will hinder local prices today.