8th May 2019 - Midweek market report

UK feed wheat markets remain under pressure after Friday's sharp £3.80 futures sell-off. May LIFFE hasn't traded since then and open volume sitting on the exchange is around 60,000t, which could add further pressure to old crop prices if tendered. Consumer demand is understandably quiet as markets have a decidedly bearish feel to them and, for any long holders out there, the window for an old crop resurgence is narrowing each day.

New crop continues to be shaped by weather models and with Nov'19 futures sat below £145/t, better forecasts in the UK could add further downward pressure. Until now, conditions in Europe have been excessively dry and have caused concern to growers but rain in the seven-day forecast looks set to appease crops. In the USA, the opposite is true. Winter crops look the best they have in nine years but the spring drilling campaign has been halted by wet weather. As a result, spring wheat and corn plantings sit at almost half of the five year average at just 23% complete.

US speculators still hold huge short positions in both wheat and corn. Contracts sit at/near season lows so downside feels limited but there's nothing serious enough in the weather forecast to cause concern just yet.

We have a USDA report out on Friday and ongoing tariff talks between the USA and China but market focus remains fixed on global weather models. If the US dries up and the EU continues to see rainfall as forecasted, then we have the perfect storm for huge crops. However, that is a big 'if'.

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