Farming News - Markets continuing to adjust their position after USDA report contains some surprises
Markets continuing to adjust their position after USDA report contains some surprises
The USDA report issued on Wednesday once again confounded those who expected bullish news.
Reductions in Canadian and Australian wheat crop estimates were more than offset by increases for Russia and India, inflating the world wheat stock forecast by 2.33 mln t to 261.29 mln t.
On top of this, USDA raised its US corn yield estimate, resulting in a 7.95 mln t increase in the global crop prediction.
The overall result was that markets reacted negatively, despite many traders being somewhat sceptical about the report’s numbers.
"Whatever the rights or wrongs of the detail in the USDA report, the fact remains that fund managers will rely on this information until the October report," said David Sheppard, managing director of Gleadell.
With trade tensions continuing, it seems that a bullish surprise would be needed to lift values in the short to medium term.
In the UK, the confirmation of the closure of the Vivergo bioethanol plant at the end of September, plus a bounce in sterling on some pro-deal Brexit chat, has taken prices lower, with end consumers relatively relaxed about extending forward cover.
Prices remain generally attractive for farmers in the context of the UK supply and demand situation and the wider global market sentiment.
USDA increased its US soybean crop forecast on Wednesday night. After initially trading lower, the market found support with talk of further trade talks between the US and China.
The biggest potential swing factor to the US balance sheet is its export number, and any change to the tariff situation in the US could support US beans. So, short term, the bearish USDA numbers could well push the market lower, but politics remains a significant wild card.
Despite USDA cutting global rapeseed production again, the European futures market continues to slip lower, as crushers appear to have decent coverage pre-Christmas.
In addition, we hear rumours that some of the multi-seed plants on the Continent that were scheduled to process rapeseed are likely to move to soybeans, as cheap US supplies look to find a home.
In the UK, farm gate prices have also been affected by the rally in sterling. The currency continues to find support after EU chief Brexit negotiator Michel Barnier said yesterday that he expected a UK withdrawal agreement would be signed in the next six to eight weeks.
There are many now suggesting that this “Barnier bounce” in sterling could extend back to the technical resistance level at €1.16, which has the potential to further undermine domestic UK prices.