David Sheppard, Gleadell’s managing director, comments on the wheat market

We have seen another week of bearish news for US markets. Stable crop ratings, continued reports of above-average yields from a harvest that was 58% complete as of last weekend, together with weather patterns deemed favourable for both soy and corn crop development have kept pressure on prices.

The long US weekend was followed by strong commodity liquidation by long holders, pushing both wheat and corn to fresh contract lows.

MATIF also hit new contract lows earlier in the week as uncertainty over quality intensifies. Traders are trying to fathom whether that is bearish or bullish for MATIF wheat futures.

French crop estimates continue to decline as analysts started factoring in poorer yield prospects, leaving many asking how low will these estimates go? They now range from 37 to 38 mln t, which would represent a fall of 5-10% year-on-year.

As the French resign themselves to a reduced crop that is likely to contain more feed grain than usual, the Russian harvest has commenced with yields to date reported at 4.45t/ha, up 17% on last year. If that is maintained, output would exceed current estimates of 66-68mln t.

The UK continues to experience the fall-out from the EU referendum as continued economic uncertainty hits investor confidence. Despite assurances by the Chancellor and the Bank of England, sterling slipped to its lowest level against the US dollar in over 30 years, with another weekly fall against the euro.

Although a weaker currency supports farm prices and cheapens UK exports, the plain fact is that global markets are moving lower at a fast pace.

As we have said many times in the past, markets don’t go down for ever but, currency apart, it is hard to get bullish in this market. However, UK production size and quality remain as very important variables still to be determined.