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Weekly Commodity Report w/e 19th January 2018

May UK wheat futures are range-bound between £140-£143/T where they have resided since 27th November last year.  If anything was going to make it break out of that channel, it was last Friday’s USDA report, and it did when the UK markets opened on Monday – but only to £139.75/T (a 1-year low) for a few hours before reasserting itself back to £141/T.


Friday’s World Agricultural Supply and Demand Estimates (WASDE) report was quite bearish towards US wheat with ending stocks 29Mln Bushels higher and 2018 acreage higher than expected at 32 Mln Acres; usage was also reduced by 20 Mln B, and imports were higher.  In an already over-supplied market this resulted in a slight fall, for which the wheat shorts (those who had sold the market) were no doubt grateful.  World wheat ending stocks were more-or-less as expected at 268 Mln T.  Russia continues to dominate wheat export markets exceeding both US and EU exports, and responsible for 20% of global exports.  Record export levels are forecast for Russia in 2017/18 aided by favourable exchange rates and its geographical proximity to the growing markets of the Middle East and North Africa.


The USDA report released on the 12th January had a negligible effect on the soya markets.  It reduced US soya yields to 49.1 bushels/acre on 89.5 Mln A; the crop remained a US record.  The USDA also increased the Brazilian soya crop by 2 Mln T to 110 Mln T, while Argentina’s crop was reduced by 1 Mln T to 56 Mln T, which increased global ending stocks to 98.5 Mln T.  However as of the 9th January, the funds were net short of 12.5 Mln T of soya beans, and the report did not give the funds the data they had hoped for.  Since then soya prices have risen from $9.5/Bushels to $9.7/B, and soya bean meal from $315 to $329/short ton, so we presume the ungrateful shorts then decided to start buying back their positions and use the cash to play in another market.  It is expected that as the short covering continues, the soya markets will continue to climb.  The soya trade is now focused on the weather conditions with less than optimal conditions in South America.  In Brazil’s Mato Grosso the soya harvest has only just started with 1% complete (5% last year), it is anticipated that this year’s harvest will be three weeks behind that of last year due to late planting because farmers had to wait for the rain.  Early reports indicate good yields resulting from good weather conditions since planting.  Argentina has been generally dry, although it rained in some areas last weekend.  Their soya crop is about 95% planted, and it is possible that in the very dry areas, the farmers may miss their planting window.  GM soya is just under £300 ex UK port.

The £ continues to strengthen against the $ this week, reaching pre-Brexit levels for the first time this week trading at over $1.38 following reports that several EU countries including the Netherlands and Belgium were open to a deal where Britain to remain closed to the EU trading bloc.  It seems France is making overtures with its offer of loaning us the Bayeux tapestry.

The Bayeux tapestry is believed to have been produced within a few years of 1066, and the first scene narrates the story of Edward the Confessor sending his brother-in-law, Harold Godwinson, to Normandy.  It is arguably the oldest European cartoon, having both pictures and words, and was probably commissioned by Bishop Odo of Bayeux who is depicted fighting at the Battle of Hastings and was William’s half-brother.  The tapestry is thought to have been produced in Canterbury, because Odo was made Earl of Kent in 1067.  So is the tapestry (actually an embroidery) English because it was produced here, or French because Norman England was part of Normandy?