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Weekly Commodity Report w/e 9th February 2018


UK May wheat futures are trading at about £137.75/T, compared to last Friday’s close of £137.60/T.  The low and high during the past week have been £136.0 and £139.9.Various USDA reports (US exports and Global S&D) combined with the stock exchange sell offs have added spice to the markets this week.  Chicago wheat pulled back from 4-month highs after the USDA figures were released in the early part of the week and then reversed as investors switched money from stocks to commodities. 

Monthly US wheat export figures were again reduced, this time by 0.7Mln T to 25.9Mln T, due to continued competition for export markets.  The USDA even went so far as to warn US wheat merchants that they will lose export market share, whilst Russia, Canada and Argentina, are on target to increase their market share; lower exports means that the US carryout is expected to be 27Mln T.  Russian export projections in September were around 30Mln T but this is predicted to increase possibly to 34-36Mln T.  There have been mixed reports about this year’s Russian crop which is currently in the ground and covered in snow.  The Russians are indicating that yields will be lower than last year although conditions in neighbouring Ukraine appear favourable, and may even exceed recent records (27.3Mln T in 2016) due to a warm and wet winter.  In the latest EU Commission balance sheet, EU soft wheat exports in 2017/18 are forecast at 25.5Mln T.  In order to reach this level, the EU needs to export around 605,000T of wheat a week, but has only achieved this twice in the past 5 years.  Global wheat production for 2017/18 was increased by 1.2Mln T to 758Mln T due to Argentina (0.5Mln T higher) at 18Mln T, and the Ukraine (0.5Mln T higher) at 27Mln T, usage has increased by 4Mln T, so global carryout has increased by 2Mln T to 266Mln T.  Indonesia’s wheat imports at 11.5Mln T/annum, and are closing on Egypt’s 12Mln T/annum as bread consumption becomes the new food staple.


Chicago soyabeans and soya bean meal have been on a roller coaster for the last month, with March soya bean meal futures touching the lowest price since September at $310/short ton, and the highest at about $341/short ton.  In the UK, GM soya is about £312/T ex port.  The volatility has been caused by the weather in Argentina, the USDA reports and stock exchanges.  More rain is predicted in Argentina but the haphazard location and quantity will be the major influences on yields and therefore price.  The USDA report reduced US soya exports by 1.6Mln T to only 57Mln T.  This indicates the US will own more of the world’s carry out (previously 13.2Mln T) to 14.4Mln T, the biggest carryout since 2006/07.  This would normally weigh heavily on prices but as this has not happened, the inference is that the trade is sceptical.  Global soya production was reduced by 1.6Mln T to 348.6Mln T; Brazil’s soya production has been increased by 2Mln T to 112Mln T; and the Argentine crop reduced by 2Mln T to 54Mln T.  China is expected to import 97Mln T (unchanged).  World ending stocks fell to 98Mln T (96Mln T last year). 


This week has seen a dramatic change for the global stock markets.  Global equity markets were weakened further overnight with many press outlets declaring the markets officially in a 'correction period'.  US stocks fell sharply in the middle of this week and all other world markets followed.  It is said to be the worse week for global stocks since September 2011. 


The driver for the US sell-off has been expectations that the Federal Reserve will increase interest rates faster than previously predicted due to inflation.  The Dow Jones fell by more than 1000 points for the second time this week and this pattern was mirrored worldwide – even China’s Shanghai composite slumped 4.1%.  The Vix, the Volatility Index (see graph) rose significantly this week as worried investors search for safe havens, and possibly agricultural commodities, perhaps providing some lift in what have been relatively static trends for several weeks.  In currency the Sterling bounced back yesterday after the Bank of England left rates on hold as expected.  The Bank of England also upgraded their growth forecasts for the coming few years, mainly due to the more positive global environment.  The Euro saw similar gains as the Dollar continued a downward trend throughout the week.

Unless you live on another planet you probably know that Elon Musk, the CEO of SpaceX and Tesla launched his own car, a cherry red Tesla Roadster into space this week.    While, images like the one here of Starman cruising in space forever have been hard to miss, the real question is what will happen to Starman and his Tesla?

Read the article in Live Science
Read the article in the Independent

William Carroll a chemist at Indiana University and an expert on plastics and organic materials has predicted the car will last less than a year.   It is not the effect of the vacuum of space that will cause its demise.   The biggest threat it seems will be radiation in space.  The protection of powerful magnetic fields and the atmosphere on earth are lost in space meaning radiation could cut through the car.   Organic materials made of carbon-carbon and carbon-hydrogen bonds such as leather, rubber, plastic, paint and even the carbon-fiber frame will be destroyed as interstellar radiation breaks the bonds.  Unshielded from the sun this process could discolour flake and splinter apart the car in less than a year.  That is if Starman is skilled to avoid collisions with micrometeorites and other space debris under these less than favourable driving conditions.