Market Report on 11.12.17
£/$1.3374 £/E1.1339 E/$ 1.1791
Chicago wheat futures fell for a fifth straight session on Friday, dipping to fresh contract lows for a second consecutive session as a strong US dollar pressured the market. The December contract lost 24 cents over the course of the week. Funds sold 3000 contracts on the day. In the week to December 5th, in the context of a week in which the spec funds bought 11.2MMT overall to leave them 37.1MMT short, they bought 1.2MMT of wheat to leave them 21.8MMT short. A strong start for Sterling on Friday morning saw London wheat open in the red but it ended up with a very slightly higher close as the pound fell back later in the day. In crop news, SovEcon once again raised its 2017 Russia wheat crop estimate, this time by 0.3MMT to 84.2MMT. For 2018, they see country's wheat production at around 77MMT, still 10MMT above the 5-year average. Chicago corn ended the day with some small gains, helped by some light short-covering by the funds as they bought 3500 contracts. However continued weakness in wheat as well as a lack of supportive export news put a ceiling on gains. For the week, corn prices still ended 1.7% lower and have fallen five of the past six weeks. Friday's CFCT report showed that in the week to December 5th, the spec funds bought 3.6MMT of corn to leave them 25.7MMT short
Chicago soybean prices fell to one-week lows on Friday, failing to find any traction from announcements of two large export sales on Friday. Private exporters sold 268,000MT of soybeans to China as well as 129,000MT of unknown destinations. However the market seemed to take most of its lead from some wetter forecasts in South America as well as continued reports that South American producers could switch corn acres to soybeans. Looking at South American planting progress, according to the Argentine Ministry of Agriculture, soybean plantings were 53% complete as of December 6th vs 57% last year and 56% on a 5-year average. In Brazil, conditions remain mostly satisfactory with regular precipitation and as a result, AgRural raised its country's 2017/18 soybean production forecast by 2.7MMT to 112.9MMT. Safras and Mercado estimate that 26.7% of the 17/18 Brazilian soybean crop is forward sold compared to the average of 33%. Friday's CFTC report showed that in the week to December 5th, the spec funds bought 3.9MMT of soybeans and 2.6MMT soymeal to leave them 4.2MMT long and 5.8MMT long respectively.
FX & Energy
Sterling fell on Friday, trading almost two U.S. cents below a high reached earlier after a breakthrough in Brexit negotiations, with cautious investors booking profits after a sharp rally in recent days. Britain and the EU reached a divorce deal on Friday that paves the way for arduous talks on future trade ties, easing immediate pressure on Theresa May. Sterling initially rallied to as high as $1.3521, and to a six-month high against the Euro on investor relief that an EU summit next week will clear the talks to move forward. But with UK's economy still facing headwinds, traders were quick to take profits on Sterling, pushing it down over the day..