David Sheppard, managing director at Gleadell grain, summarises the goings on in the wheat market.

The week has been dominated by actions from within the Euro-zone. Optimism surrounding the apparent Greek bailout initially supported the markets. However, this was short-lived as the collapse of MF Global, followed by news that the Greek government proposal to hold a referendum over the proposed agreement, sent the markets back into financial turmoil. The situation is from clear-cut, with Sarkozy and Merkel putting extreme pressure on Papandreou – to the point where Papandreou has announced his intention to step down. However, this does nothing to resolve the wider EU debt crisis.

Fundamentals remain off the radar, but the re-emergence of firstly the Ukraine as a seller to Egypt, and secondly Argentine wheat being offered cheaper on a FOB basis only to lose out on freight, shows the pressure EU wheat is operating under. Adding the potential of record Australian wheat supply and increased exports, the wheat market should remain capped unless we see a major problem effecting 2012 supply. 

Summary:

• GC raises 2011/12 global forecast for maize/wheat production, stocks also increased.
• EU raises the volume of grain that can be imported into the EU under the TRQ to take effect 1^st January. 
• Egypt’s GASC purchases 300,000 tonnes (120k/mt Russian/180k/mt Ukrainian) - first Ukrainian purchase since 2008.
• Argentina seeks to export a big chunk of remaining wheat stocks - offered cheaper than Black Sea on FOB basis.
• Australian wheat supply may hit record high on stocks, resulting in increased exports.
• Japan purchases Ukrainian maize, replacing traditional exporters US/Canada and Australia.
• PM Putin warns Russian grain traders over ‘excessive’ exports - protective tariffs.
• Drought seen affecting Ukrainian 2012 winter grains, with crops in a poor state reported at 39%.