Prices 10/12/18

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Good weekly US export sales data for wheat surprised the market. At 712kt this was well above what most punters were expecting, 300kt – 600kt. Futures moved 3% while cash bids on the ground were not as keen to march higher. If the US is to take advantage of a potential slow-down in Russian export offers it cannot afford to lift it’s FOB values by much if any hence the apprehension to follow futures by the physical traders.
Argentina will also offer some stiff competition with milling wheat with offers at just US$217.50 FOB there. To put the Argentine offer into perspective we see similar wheat offered FOB US Gulf at about US$233. To land both of these at a location like Egypt it would make the Argentine product worth US$258 and the US product worth about US$266, but both appear expensive when stacking it up against Black Sea wheat which would land at Egypt for something like US$240 – US$250.

Technically the wheat futures market at Chicago was over bought, this rally wouldn’t have alleviated any of this going into the WASDE report on Tuesday night. The consensus among the punters is US ending wheat stocks will grow on Tuesday night. Some see reductions in Argentina, Australia and Canada potentially countering any potential increase in US stocks. There is also a good chance that EU production will be lowered this may only counter higher ending stocks as the EU export program has also been slow in 2018.
We also have the arrival of Pakistan on the export market, they had been factored in to move 1mt but this could rise.

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