US market is unchanged on the week, as a slightly negative USDA report dampened the recent continuation of fund buying, which along with new crop weather related issues, had been underpinning the Chicago market. US export projection was trimmed by 25mln bushels, raising stocks to over 1bln bushels, although the USDA reported a more bullish outlook for corn exports, mainly due to lower Argentinian and Ukrainian production and export availabilities.
EU prices are about €2/t up on the week, as a slightly weaker euro and rising Black Sea prices supports the move. In addition, following the recent purchase by Saudi Arabia, the numbers would suggest French wheat being in pole position. This has firmed cash values, although traders also report that some German and Baltic wheat may have been done, but why pay $10/t more, given the current price spreads? The fact that the French should get the majority share only compensates for the volume of Algerian business lost this season to Argentina (more vessels in their export line-up) and other African destinations, to the Russians, which overall shouldn’t greatly alter their balance sheet. Of more interest will be if Pakistan, now seen exporting wheat, can make the spec. Another mediocre week from Brussels would project seasonal EU exports at best 22mln t, and although the USDA lowered its projection yesterday to 26mln t, this is still too optimistic.
UK LIFFE is about £2/t down on the week, although in most of the country, physical prices remain unaffected by movements on LIFFE. The market remains currency driven, as earlier in the week. LIFFE gained on a weaker pound, only to dip again yesterday as the BOE hinted at earlier and larger interest rate rises, which pushed sterling back above the $1.40 mark, before slipping back later in the day. Market dynamics continue to project increased movement of grain from the south/ east, into the north/west, as higher delivery premiums cover the extra haulage.
In summary, the US wheat outlook diminished slightly yesterday, but the size of the fund-short and new crop weather issues is still seen providing underlying support. EU show little signs of substantially increasing its export outlook, despite the recent Saudi business, with Russian values continuing to drive the cash market. In the UK, LIFFE is becoming increasingly influenced by currency fluctuations, whether it by ongoing Brexit issues and the perceived ramifications, or by the BOE’s monetary policy. The USDA global outlook showed minimal reductions in total overall inventories, which should continue to provide resistance to any potential market upside.