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Weekly Commodity Report w/e 6th July 2018

This week the US celebrated the 4th July, Independence (from the UK) Day, the same week that our Prime Minister was trying to reach consensus to agree on the UK’s independence from the EU.


We observed quite a few fireworks: in the US, the UK, China and the agricultural markets.  As a rule, this Report tries to ignore politics, but this week everything was charged with electrical static, steroids and testosterone.

On Friday last week, Strategie Grain announced a 4.6 Mln T downgrade to French wheat yields to 33.2 Mln T, due to excessive rain; UK prices lifted sharply following the French.  Then on Tuesday Strategie cut the yields in Poland, Denmark, Sweden and Finland by about 1 Mln T due to drought.  Later in the week, the same bunch reduced the wheat yields for the Baltic States.  A German farmer group then reduced the German grain harvest estimate - 10% lower than last year to 41 Mln T the smallest harvest since 2007.  Overall the EU may have 10 Mln T less wheat than last year.  Add that to the 17 Mln T ‘loss’ compared to last year from FSU, and local predictions of a sub-14 Mln T crop for the UK, then that adds up to a £12/t increase in UK wheat prices in a week.  Raw material buyers are stunned, some are buying into the rapidly rising prices fearing worse news, others are standing back waiting for the harvest.  The US winter wheat harvest is 50% complete, The French harvest is about 5% complete as is Russia’s, the latter reports yields down about 15%.   


The imposition of tariffs scared the funds out of the soya market, so soya beans have dropped from $10.5/bushel in early June to $8.40/bushel on Thursday (however there was a significant correction on Friday).  Currently China is matching Trump’s every move, $ for $.  The US’s largest export markets have all been threatened and have imposed their own tariffs.  So the biggest bully on the planet has no friends, and the US export markets are closing fast, prices of agricultural products have fallen, directly affecting the livelihoods of the farmer-states that voted for Trump.  There was one report which stated that Brazilian soya was trading at a 17% premium to US soya.  At some point very soon, prices will be so low, that the funds will return, on the basis that global supply and demand is so tight that someone will buy US goods, even though it may not be traditional markets.  In the physical world, US planted acreage will exceed maize this year for the first time in 35 years, at 89.6 Mln acres compared to maize at 89.1 Mln acres.  US spring crops are reported to be in good condition, although there are always weather concerns/scares before the crop is safely in the barn. 

Allegedly, as Trump has established direct communications with North Korea, he no longer has to treat China with kid gloves.  Trump has now threatened all his biggest agricultural export markets with tariffs: Canada, China, Mexico, and the G7 (EU and Japan).  And all of them are readying to retaliate.  Mexico has already hit imports of US pork, and could additionally target the $4bn of US soya and maize which would-- hit the Corn belt, particularly Missouri, Kansas, Iowa and Nebraska, all of whom voted for Trump.  This trade war could get nasty.

Commodity% of US ProductionValue $ bn

What happens in a Trade War: Chickens and Soya. 

The number one topic of conversation does seem to focus on football, as the country becomes a little bit more excited to consider an unthinkably positive result.  Fingers crossed….

We are so used to seeing pitch invasions at football matches as the watching crowds become rather excited about on pitch activities.  In Australia, they have recently had a different pitch invasion during a football match: View the full article