Directionless but still strong
After an exciting two weeks previously in the grain market, we keep a largely directionless week. The market continues to keep a close eye on the weather around the world, with the wheat production in an increasingly fragile position.
Overnight the USDA released the may WASDE report. The may report is the first of the year to forecast the coming season. Although, with these initial estimates, it is probably worthwhile taking them with a pinch of salt. In figure 1, the global projections for wheat production and end stocks are displayed. These unsurprisingly show a decline in both, with production down year on year 10mmt, and end stocks 6mmt. This is slightly above most trade expectations, but there is still a long way to go.
One thing to keep an eye on is Russian wheat production, as we all know they have been one of the most important factor in global trade. The USDA forecast at 72mmt, a huge reduction from last years 85mmt. Although this must be put in perspective, 17/18 was a record production year in Russia, and even with such a large fall, production is estimated at 3rd highest on record.
The futures market fell at the end of last week, but since has been largely directionless (figure 3). The market is remaining at substantially more attractive levels than it was at the beginning of April. The market and farmers are still watching and waiting on weather forecasts, which will determine the production for the coming year.
What does it mean/next week?:
The cold snap which has brought rain (and snow) to the east coast has largely been limited to VIC and east SA. The country is in dire need of rain, especially in NSW and Victoria.
From all account, it looks like farmers are reassessing their planting intentions, and canola will be the loser.