A scorching hot, dry summer has ended five years of plenty in many wheat producing countries and drawn down the reserves of major exporters to their lowest level since 2007/08, when low grain stocks contributed to food riots across Africa and Asia. Although global stocks are expected to hit an all-time high of 273 million tonnes at the start of the 2018/19 grain marketing season, according to U.S. Department of Agriculture estimates, the problem is nearly half of it is in China, which is not likely to release any onto global markets. Experts predict that by the end of the season, the eight major exporters will be left with 20% of world stocks – just 26 days of cover – down from one-third a decade ago. The USDA estimates that China, which consumes 16% of the world’s wheat, will hold 46% of its stocks at the beginning of the season, which starts around now, and more than half by the end. The 126.8 million tonnes China is estimated to hold is up 135% from 54 million five years earlier.
In currencies, the EUR/USD touched a fresh 1-1/2 week high level close to 1.1610 while the US President Donald Trump’s critical comments on the Fed’s policy tightening kept exerting downward pressure on the USD and turned out to be one of the key factors driving the pair higher. The GBP/USD is trading into 1.2900 in light of FOMC meeting today, winning over 250 pips up from the yearly low achieved last week around 1.2660, holding on to gains even after comments from EU’s Barnier and UK’s Raab, following a round of talks.
In commodities, Gold prices hit a fresh one-week high earlier in the day as the dollar softens after U.S. President Donald Trump said he is “not thrilled” about the Fed’s decision to hike interest rates. Regarding Oil, and in light of today’s crude oil inventories announcement, gained on Wednesday as reports from the American Petroleum Institute (API) showed the U.S. crude inventories fell, while a potential shortfall of Iranian oil due to U.S. sanctions continue to weigh.
For today high impact news in the economic calendar are the Canadian Core Retail Sales m/m, Crude Oil Inventories and FOMC Meeting Minutes.