Jonathan Lane, Gleadell’s trading manager, comments on grain markets …

WHEAT 

The US market has continued to weaken over the past week, not helped by a negative USDA report on Tuesday.

A cut in the US export projection (albeit only 1.36mln t), was enough to trigger fund long liquidation as prices traded through long-term support levels.  Over the past week, CBOT MAY13 has fallen just over 40c/bushel ($15 per tonne).

EU wheat has followed the US market lower, although a firmer € against the US$ has resulted in MATIF wheat only falling $7 over the period. EU wheat remains supported by increased export demand driven by weather-related supply problems for other major exporting countries, leading to the French farm office AgriMer raising its forecast of French wheat exports outside of the EU to 10mln t for the 2012/13 season.

Within the UK, the festive ‘wind-down’ seems to have started, with little demand interest and less active farmer selling.

The HGCA has published its definitive results for the 2012 crop, placing mean specific weight at 69.9kg/hl, down from the 5-year average of 76.7kg/hl and the lowest value ever recorded. (NABIM G1 and G2 only recorded specific weight over 76kg/hl on 8 and 9% of samples respectively).  By contrast, average protein content is relatively high, estimated at 12.5% compared with the 5-year average of 11.8%.

Although the USDA report was negative, the recent weakness may have been exaggerated.  Black Sea wheat exports are all but over, Australian quality issues, reports that the Argentine government may lower the wheat export volume to 4.5mln t from 6mln t previously, and French wheat ‘sold-out’ on paper, does not paint a long-term bearish scenario for US wheat.  Recent losses and the weak US$ should generate some extra demand but, until tenders are issued and there is confirmation of US supplies being sold, lower prices may occur before any potential market recovery.