David Sheppard, Gleadell’s Managing Director, comments on the wheat market

• Today USDA is expected to report record US and Global 2013 corn output and a sharp rebound in global wheat production.  

• UkrAgroConsult trims Ukraine’s 2013 grain crop forecast to 52.2mln t from 52.4mln t previously – still up on 2012.

• India increases estimate for 2013 wheat crop to 93.6mln t, up from 92.3mln t previously. 

• Western Canadian planting outlook improves with return of warmer, drier weather. 

• Western Australian wheat output up 16%, offsetting potential losses in Eastern regions.

• USDA reports 32% of US winter wheat crop in good/excellent condition – a further deterioration of the hard red winter crop.

• Kansas wheat crop down 18% after drought and cold spring weather following the annual crop tour.

• USDA reports corn crop 12% planted against 69% last year and 47% as five-year average.

• Investors start cutting US corn planting forecasts, with potential switch into soybeans due to late planting.

• Dry weather may cut Ukrainian spring grain yields by 30% - mainly barley/spring wheat.

New crop US futures remain under pressure as forecasts for dry weather across the US Midwest has raised expectations that farmers will rapidly increase corn plantings, currently reported at a 29-year low.

Although progress should improve, analysts have already started trimming their expectations of the final planting figure, with reports suggesting that up to 2-3mln acres may be switched to soybeans or other crops. However, using average harvested acreage and trend yields, a loss of 2mln acres would still produce a US crop 80-85mln t higher than 2012!

European levels have followed the US market lower, although soft wheat exports continue their rapid pace with 17.1mln t exported so far this season, compared with 11.7mln t a year earlier. There is a significant danger that EU exports will face tougher competition next season, especially from the Black Sea region – this has added to the negative tone.

DEFRA reported that at the end of February, 3.5mln t of home-grown wheat (28% of the 2012 crop) was still held on farms in England and Wales. Total wheat stocks held at ports, co-ops and merchants were reported at 1.2mln t (915k mt home-grown and 274k mt imported), which is consistent with the high level of quality imported wheat for milling due to the poor 2012 UK crop.

The USDA report tomorrow is expected to report bearish numbers on production and stocks. Globally, weather has improved in recent weeks although there still remains a concern in some of the key producing regions. However, for a major rally in wheat prices, a few of these concerns will have to manifest themselves into major production issues – as they did last year. In sterling terms new crop prices are around £30-35/mt higher than a year ago.