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July 25, 2018

Wheat prices are exploding on further production cuts

Cereals
  • Wheat prices exploded today amid further concerns regarding the quality of the Black Sea crop and further reductions in the 2018 EU soft wheat production which is now seen below 130MMT, a 6-yr low, according to French analysts Strategie Grains.
  • Both LIFFE and Matif wheat futures jumped more than 2.7% and posted fresh contract highs for a 5th consecutive session. Buyers continue to cover their increased winter requirements due to a lack of forage and push prices higher.
  • The UK wheat harvest continues to progress very rapidly with surprisingly decent yields despite the drought and top quality.
  • Rumours have emerged from Russia where the government could adjust its wheat export policy later during the campaign to keep bread prices under control. Following weeks of drought limiting yield potential, excessive rainfall put quality at risk in the northern regions.
  • Coupled with mixed results from the annual US spring wheat crop tour in the Dakotas, CBOT wheat went to limit up ie +c$35/bu on both Sept and Dec contracts (+7%), reaching its highest in more than a month. Dec-18 Minneapolis spring wheat was back trading above the $6/bu mark for the first time since mid-June, testing its 100-day moving average technical resistance.
  • According to the Euronext’s weekly COT report, speculators increased their net long position by more than 8,600 contract to 37,084 in matif milling wheat.

Oilseeds

  • In the wake of a sharp rebound in wheat and a reduced EU output, Nov-18 Matif rapeseed settled above the 370€/T mark for the first time since early November 2017 after posting a strong 5.00€ daily gain. The oil complex was also supportive to rapeseed prices today.
  • CRM Agri clients continue to report mixed to poor rapeseed yields due to poor flowering and flea beetle damages.
  • Despite the $12B plan announced by the Trump Administration to support US farmers severely impacted the trade war with China, soybeans remained muted due to a lack of fresh news.
  • In a diplomatic exercise, the head of the EU delegation to Malaysia stated that the bloc was ‘open to palm oil’ from south east Asia whilst the European Parliament agreed in June to phase out palm oil by 2020 [more info here].

July 25, 2018