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US Corn Ratings Improve, Dry Weather in Russia Increases Grain Sowings

25 October 2013

GLOBAL - US corn crop ratings have improved, supporting earlier anecdotal reports of larger yields, according to David Sheppard, Gleadell’s Managing Director.

Winter wheat plantings are 79 per cent complete – crop condition is 65 per cent good/excellent.

Reports suggest the decline in the Ukrainian winter wheat area is smaller than thought – just 500k ha down from previous estimates of 1.5 million ha.

Dry weather in Russia has helped increase winter grain sowings, now reported at 80 per cent of planned area (13 million ha).

Global wheat markets have rallied, underpinned by new crop concerns and delays in winter plantings.

Prices of Black Sea and Russian wheat exports have risen as logistics and the front-loaded export programme exhaust immediate supplies.

The Argentine ministry shocked the market earlier this week by cutting the 2013 wheat crop estimate to 8.8mln t. But it later admitted this was an underestimate, leaving the market uncertain of the real figure.

Australia is forecast to experience hotter and drier conditions, a potential threat to wheat production.

Global grain markets continue to consolidate as a lower Argentine production estimate, weather concerns in Australia and Black Sea problems with old and new crop continue to support prices.

The USDA finally resumed work and starting re-issuing weekly crop reports, which showed a 5 per cent good/excellent improvement in the corn crop ratings, supporting the better-then-expected yields seen so far during the harvest (now 39 per cent complete). Winter wheat plantings are average but receiving beneficial rain.

Despite the talk of better US crops the market largely ignored the ratings, with US wheat prices reaching a four-month high due to a potential increase in exports to Brazil and declining global competition. US corn is unchanged on the week.

European markets continue to defy gravity, as even with a soaring euro:US dollar exchange rate the Nov MATIF has managed solid gains and is up €8/t on the week. The market remains supported by the strong export pace, although as previously reported, this is not French based. Delays in EU corn harvests are also increasing the demand for wheat in the short-term.

The UK market has firmed £2/t on the week, following the global trend. Spot demand remains tight although better values have increased farmer selling. Farmers continue drill crops as they dodge the showers; reports suggest the UK wheat area is set to recover to over 2mln ha.

In summary, this is a tough market to call. Most of the current rally has been attributed to the strong demand for wheat, and delays in winter wheat plantings. Demand is still there as are concerns over global supply for both old and new crop, but a record corn crop is being cut and current wheat/corn differentials are unsustainable.

The USDA is still playing ‘catch-up’ in issuing data, including the key World Agricultural Supply and Demand Estimates (WASDE) report which is next due for release on 8 November.

TheCropSite News Desk

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