WHEAT MARKET

Markets have seen a further week of higher prices due to adverse weather and poor crop out-turn.

Crop estimates are tumbling as dryness and heat prevails across most Northern and Southern Hemisphere wheat regions.

In the US, the winter wheat harvest is in its final stages, while spring wheat is just commencing. Actual yields of spring wheat will be of interest, following the lower-than-expected findings from the recent crop tour.

US new crop sales and shipments are still seen running behind on the year, although increased business is expected later in the season.

EU prices continued to be supported by declining crop prospects as adverse conditions hit production.

The German Farmers’ Association this week lowered its estimate for the 2018 wheat crop to around 18mln t. Sweden is the latest to feel the heatwave and estimates suggest its wheat crop could be 40% down on the year. That would turn the nation from exporter to importer.

Declining crop prospects continue to reduce the surplus in most of the main EU exporters. Germany is now almost a domestic market and French prices are well above comparable Black Sea supplies. That leads to the question of how long key importers like Algeria refuse to purchase Black Sea origin wheat.

The UK market has also firmed on the week, following the global trend higher. Rains at the end of last week temporarily stalled harvest in some regions, although the return to drier conditions should increase the pace.

Regional availability remains mixed. There are good supplies of new crop wheat in the south and east, but limited supplies in the north and west where harvest has only just commenced.

GLEADELL COMMENT

World weather issues are dictating prices. Global production is going backwards, as is the volume of wheat available for export markets.

This places importers who cannot switch to maize in a perilous position. With ample supplies of grains available over the past seasons, buyers have been buying hand-to-mouth. But, in the current climate, this means they are short and wrong.

They must decide whether to remain in the head-in-sand camp or bite the bullet and buy.

Long-term the wheat market looks supported, with the trade expecting large volumes of demand to be switched into the US later in the season.

All the above assumes we get a decent 2018-19 global maize crop which, given the current weather conditions, is not a certainty.

OSR MARKET

The volatility in the oilseeds sector continues. Deteriorating weather in key soybean-growing areas and chatter about fresh engagement on trade talks between the US and China are driving price swings in the US soybean market.

Funds have been net buyers in recent days, covering their shorts, but the next major focus will be the USDA report on 10 August.

In Europe, the rapeseed crop continues to decline. The German agriculture ministry has cut its crop estimate to 3.3mln t, and the European crop figure is slipping below 19.5mln t (while the situation in Australia is not improving).

Matif rapeseed futures have continued to move higher on the back of this, up circa €9 on the week.

The UK harvest is well advanced across most of the country, with yields generally down 10-15%. We continue to take our price direction from the activity on the Continent and currency.

Whilst the market is generally fundamentally supported, we continue to be mindful about any future ramifications spilling out from Trump and his twitter feed.