US markets, after what appears another ‘dead cat bounce’, have continued their downward spiral this week, trading back towards the recently set contract lows. Australian production was reported lower at 20.3mln t and, while 1.2mln t below the current USDA projection, still remained above local estimates following adverse weather conditions. However, pressure was re-exerted onto the market when Stats Canada reported Canadian all-wheat production at near 30mln t, 2mln t higher than trade expectations, and 3mln t higher than current USDA projection.
US exports still drag last year by 7%, and shipments for Jan-May would have to exceed those made in Jun-Nov by an additional 13% to achieve the export projection. Not an easy prospect given a larger-than-expected Australian wheat crop and a much larger Canadian wheat crop.
EU prices, like their American counterparts, have fallen on the weaker global tone. In addition, pressure was also received from the upward revision in crop size by Coceral, although cash levels show little sign of alteration due to the ongoing lack of farmer selling. EU shipments remain 22% behind last season, still pressured by aggressive sale campaigns by the Black Sea, notably Russia.
‘Deal or no deal’ has been the main interest this week, with an apparent deal struck on the Brexit divorce bill, before it was scuppered over differences relating to the Irish border. However, the grain trade marches on with little change in sentiment. Merchants shorts that had been supporting the market seem now to have sorted out their December requirements, and with the global weakness seem more relaxed in bidding for the deferred positions.
In summary, with demand from the major importers limited until the final quarter (April-June), the main question for the trade now is where can the market find enough demand to push values higher. Market analysis in the new year will increasingly begin to focus on new crop, where to be fair, there are some supportive factors. However, until then it continues to be a market where supply outstrips demand.