Market Report on 22.06.17

£/$1.2660  £/E1.1330  E/$ 1.1173

GRAIN

US wheat closed lower yesterday on a mix of profit taking (with Minneapolis wheat especially seeing some selling and Chicago following suit), some cooler forecasts in the US and reports that European wheat exports are starting to calculate into the US. European wheat markets were also lower on the day on the back of profit-taking, with some weather models also suggesting some more beneficial conditions. The GFS model continues to project a wetter and cooler outlook into early July and has even brought the changes forward into the 6-10 day timeframe in this morning's maps, but these forecasts are changing regularly. In export news, the Ukrainian Ag Ministry reported that by June 21st, Ukraine had exported 17.3MMT of wheat versus 16.94MMT at the same stage last year. Barley exports were 5.3MMT, versus 4.4MMT last year. Chicago corn closed slightly lower yesterday, with the weather forecast continuing to argue for cooler temperatures which should at the very least partially offset the lack of rainfall. Weekly US ethanol production fell 1% on the week, with stocks down around the same, however the ongoing decline in crude oil is negative. Today's weekly export sales report for US corn is estimated in the range of 0.65-1.05MMT. Ukraine had exported 20.1MMT of corn to June 21st, up 16% year on year (17.41MMT last year). UkrAgroConsult reports that the country exported 2.7MMT corn in May, up 36% versus April and 2.5 times more than in May 2016 (1MMT). They reported that 40% of corn exports went to the EU.

PROTEINS

The Chicago soy complex closed weaker again yesterday on cooler temperatures in the US Midwest as well as weakness in crude oil. Soybeans fell for the third straight session and have now lost 30 cents from Monday's highs. Soymeal hit 2 1/2 week lows yesterday as it broke out a series of $1 open/close ranges which had lasted for 6-straight sessions. Soybean oil was also weaker, with expectations that President Trump would make an announcement on new EPA measures (eg biodiesel imports, producer/blender subsidies) proving unfounded. Today we have the latest export sales report with soybean exports estimated in the range of 350,000-750,000MT and soymeal in the range of 50,000-300,000MT. In South American news, the Argentine Peso slumped to new all-time lows yesterday which might incentivise some farmer sales. In addition, Argentine grain exports should begin to return to normal after the government ordered port workers to return to work following a strike which has lasted over a week at Rosario (responsible for shipping 80% of Argentine grains).

                                                                                     FX & ENERGY

The debate on UK interest rates took another turn yesterday, with Bank of England Chief Economist Andy Haldane admitting that he did consider voting for a rate hike last week and although in the end he sided with the 5-3 majority for no change, he noted that “The risks of tightening ‘too early’ have shrunk as growth and, to lesser extent, inflation have shown greater resilience than expected”. This seems to go against the views of Governor Mark Carney earlier in the week who seemed to pour cold water on the ideas of a hike. However looking in more detail, Haldane does seem to agree with Carney on the high level of uncertainty, suggesting that only if things pan out ok would a small tightening be appropriate. Pricing expectations for a December hike jumped from 20% to 44% and GBP/USD jumped from 1.2591 to 1.2708.