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

WHEAT

Factors depressing the market

• US corn crop harvest now 73% complete and winter wheat plantings 91% complete; crop condition 63% good/excellent.  
• Ukraine hopes to export a record 3.5mln t of grain in November on top of 3.4mln t in October, mostly due to increased corn shipments.    
• China National Grain and Oils Information Centre puts Chinese wheat imports at 5mln t, lower than current USDA projections.
• Kazakhstan nudges up 2013/14 grain export forecast to 9-10mln t due to a better-than-expected harvest now estimated at 19mln t.
• IGC raises global 2013/14 corn and wheat production/stocks to 696mln t and 182mln t respectively.   

Factors stimulating the market

• EU wheat prices remain steady as European Central Bank cuts interest rates by 0.25%. Supportive for euro prices but not bullish for UK exports quoted in sterling.
•  Argentine 2013 wheat production reduced to 10.5mln t; exports cut to 4.2mln t (USDA attaché); supports ideas of increased Brazilian imports.   
• Russia’s winter grain sowings 87% complete (14.2mln hectares) as of 5 Nov – 16.4mln hectares were originally planned and 15.6mln sown last season. 

The US market remains dominated by the ongoing corn harvest now put at 73% complete. Reports of better-than-expected yields support the theory that the USDA will increase yield and production estimates in their report later today. In addition, the apparent slowdown of US wheat exports, the improving condition of the winter wheat crop and a good planting rate (91% complete) has kept the market on the defensive. Over the week US corn is down $4/t, with wheat down $8/t.

EU markets continue to defy gravity. MATIF has slipped just €1/t over the week, supported by a weaker exchange rate and reports of key importers seeking supplies. Fresh tenders by Egypt and Algeria raised hopes of export demand, with traders expecting French wheat to be in contention due to rising prices/declining availability in the Black Sea region.

However, results from the Egyptian tender were disappointing, with only 60tmt purchased and this was sourced from Romania. On a cost and freight basis the French offers were $5-10/t too expensive, and again revealed the reluctance of Egypt’s General Authority for Supply Commodities to buy grain at current levels.

UK values have drifted £1 on the week with end-users reluctant to extend coverage. It remains almost impossible to sell spot wheat at sensible prices and, with shipments of new-crop corn arriving in the UK and the likelihood that cheaper barley is here to stay for the remainder of this season, there is little interest in forward wheat.

In summary, it appears that the entire grain trade is on hold waiting for the USDA numbers later today and the Indian export price due to be issued next week. Hopefully a clearer picture will emerge on market price direction once traders have been able to digest this information.