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

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Support has entered the market due to signs of increased political tension in the Black Sea region, ongoing quality issues in the EU and Ukraine, and funds looking to bank profits covering part of a large short CBOT position.

Next week the USDA will produce its monthly update with the trade expecting increases in yield and stocks for both US corn and wheat crops.

EU markets are all about quality and the debate over the Euronext MATIF contract and its relevance to the delivered silo specification. The two delivery silos (used by Socomac and Senalia) today have announced they will use the same intake criteria (76kg/ max 15% moisture / max 4% broken grains / max 2% impurities / min 10.5% protein and base 220 Hagberg with a tolerance to 170) for this season. Euronext has stated that discussions for changes to the contract for the first ‘untraded‘ position (May 2017) will begin soon.

Intake at this specification would rule out North African milling markets and is roughly in line with the US SRW wheat specification. Reports that up to 50% of this year’s French crop has Hagberg below 180 show the magnitude of the problem faced by France. Many would say that having a delivery specification that is different to the futures contract specification is pure madness.

The UK wheat harvest continues to gather pace as farmers dodge showers to get wheat into the barns. Early signs remain promising with good yields reported, although there is variability, but with good specific weights and generally lower proteins.

Yields would suggest that the crop is expected to outweigh earlier estimates, with merchants now projecting crops in excess of 16mln t, and some moving towards 17mln t. If this is correct, the outcome would be an increase in exportable surplus to around 3mln t and places even more emphasis on the UK achieving export quality, given the increased amounts of feed grade wheat available across northern Europe.

In summary, crops are likely to get bigger, and for wheat, a larger proportion of the crop will be feed grade at the expense of milling. Given the likelihood of a record US corn crop, this does not bode well for the future price direction of coarse grains.

Milling prices, however, have more support given the potential for lower availability. The USDA report due next Tuesday is expected to maintain the bearish outlook for global supplies.



Jonathan Lane, Gleadell’s Trading Director, comments on the OSR market

= Markets have been underpinned by farm selling all but stopping across Europe as growers focus on completing their wheat harvest.

Soybean prices continue to slide as US crop conditions maintain the best crop ratings figures for 20 years. The expectation is that soy prices on CBOT could move lower still. That said, rapeseed oil is competitively priced into the EU biodiesel sector for the winter compared to soybean oil and we should expect to see good demand.

It is difficult to be convinced that the market is going to see a big rally given the record soybean crop that is expected in the US but, for the time being at least, prices seem to have stabilised.