David Sheppard, managing director of Gleadell grain merchants, gives an overview of the week in the wheat market.

Trading the fundamentals on most commodities remains tricky, as ongoing concerns over global economic prospects, worries in the euro zone and general uncertainty has traders second-guessing the next market move.

Fundamentally, the USDA report last week confirmed a tight US and global corn scenario, but with what appears are ample supplies of wheat, albeit with demand set to reach new record levels.  As the harvest slowly moves into full swing across mainland Europe, crop estimates are revised on an almost daily basis.  The latest German wheat crop is now projected at 22mln/t, as late rain has damaged crops already weakened by a spring drought. France’s farm agency recently raised its wheat crop to 33.3mln/t; also stressing the crop had reasonable quality for flour making. Crops in the Black sea region have seen a marked recovery from last year, and this week both the Ukraine and Kazakhstan has raised their 2011 grain crop forecast, to 46.26mlnt and 18.9mln/t respectively.

US crop ratings, following the recent fall over the past few weeks, have stabilised following the adverse conditions experienced that led the USDA to reduce the projected yields of the corn crop last week.  US farmers reported 7 million acres where plantings of soybean and spring wheat had been prevented due to poor weather.

In summary, the markets have digested the USDA data and now the bulls will need further feeding before moving.  Fundamentals still remain outweighed by macro economic factors, and therefore, markets will remain volatile. Egypt are in the market today for October wheat, and have bought Russian and Romanian wheat at a discount to other origins.