Jonathan Lane comments on the wheat market

US markets remain firm amid continued dryness in that country and other markets are following suit, with the ongoing story of increased global import requirements and declining export availability adding support.

There was a short-term spot dip in the markets at the start of the week but prices have traded back higher. This follows concerns over Canada’s ability to export out of the wider Vancouver area after extreme weather struck the Pacific North West, bringing widespread disruption.

As we have written about for a number of weeks now, EU exports continue at an untenable pace. Brussels is still to release its latest export numbers due to bureaucratic issues, but extrapolating the most recent French port data suggests October exports were at a seven-year high.

Overall EU shipments are running 30% ahead of last year’s pace and on course to shrink ending stocks to an exceptionally tight 6-7mln t – around an impossible two weeks’ worth.

Australian weather remains unfavourable for wheat, adding to global concerns over quality. However, the crop is on course to exceed overall export capacity, so there will be plenty of wheat to ship, albeit of lower-than-usual quality.

Ethanol production in the US continues to progress, with production at 1.06 mln barrels/day for the week ending 12 November, up 2% on the week and over 10% higher than the same week last year. Weekly corn usage continued to outpace the required rate by around 7%.

Argentina continues to be about the only story offering any reprieve to global output, with latest estimates suggesting a 1% increase in plantings, although this did little to calm the market.

The market will be turning to the outcome of the next Egypt tender as a guide to prolonged sentiment, as traditional exporters continue to turn their gaze inwards, constantly adding to the pressure on importers and keeping the market supported.

UK prices remain firm following world markets higher, despite sterling firming significantly on expectation that interest rates will increase in December.