US markets have slipped further over the past week as fund managers continue to build on their already net short position. Talk of record cold temperatures across parts of the US winter wheat areas and data showing crop ratings declining from November in all states, except Kansas, has provided little support to a market driven lower by a continuous sluggish export program. Although wheat sales are slightly higher y/y, shipments remain 8% lower y/y, with traders almost resigned to the likelihood of further increases in US closing wheat stocks.
European prices have followed the US lower during the past week, with new crop values getting within €2 off the yearly low set back in March 2018. Although Russian export prices have weakened, they are still higher than French, German and Baltic supplies, which should allow exports to further decline over the next few months. Despite various rumours, the Russian agriculture ministry again denied that export quotas had been set on exporters for grain shipments, maintaining a 42mln t export outlook for the season.
UK old-crop values are virtually unchanged on the week, although new crop prices are down £2/t on the week, pressured from a rise in sterling to a near two-year high. Supporting the rise in the pound is the possibility of a delay in Brexit, although this depends on how voting goes on the Prime Minister’s Brexit deal and a sequential agreement from the EU to extend the deadline.
In summary, US markets have reset contract lows and both the EU and the UK got close to taking out yearly lows set last March. With US, EU and Black Sea export projections all looking heavy, the concern now for the trade is, how big is international demand, and how big is the export long, and when does the market liquidate facing the huge market inverses? US/China talks will provide support, especially if wheat is included, but weather seems to have been placed on the back-burner for now with much colder temperatures set for the US and Australia potentially facing its third consecutive drought season.