David Sheppard, managing director at Gleadell presents the latest Gleadell’s Grain Market Report, looking at the latest developments in the international wheat market. 

The USDA shocked grain markets on Thursday by announcing a much larger than expected area planted to Corn of 92.28 million acres; also Corn stocks came in above expectations at 3.67 billion bushels. 

This figure was well above their June estimate of 90.7 million acres and resulted in Corn prices being locked limit down in Thursday’s day trade, with the July 11 contract seeing the biggest one day fall for a Corn contract in over ten years. 

In recent weeks, US farmers have been reported as struggling against wet weather to get the crop planted. However, if the USDA’s numbers are correct, they appear to have done the job.

Whilst soybean plantings didn’t quite meet analyst’s predictions, US farmers also planted more spring wheat than expected.

The world wheat market has been a follower of Corn over recent months and the USDA numbers caused a major sell off in Chicago and other wheat markets with LIFFE closing down by £11+ and Matif by €12–15.

Does this mean that prices must now head inexorably lower?  We would say perhaps ‘yes’ in the short term but maybe ‘no’ thereafter.  

Whilst yesterday, and probably for a while, we may see markets under pressure – it is also true to say that world Corn stocks remain  tight and that the world will again draw down on wheat stocks in 2011/12.  

In the UK and EU we have a tight wheat market with a limited exportable surplus. Whilst in Russia, where the drought and subsequent export ban started a year ago, heat is again building.  

On the other side of the coin, things look good in Australia - and India and Iran have signalled that they may have wheat to export.  

Prices remain good for farmers on any historical basis and, whilst prices have fundamental support, it is true to say that the funds - some of whom never look outside the USA - may well see yesterday’s numbers as a further reason to sell agricultural commodities in the short term.