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

Another week of rumour and counter rumour as earlier reports of potential crop losses in the Ukraine and talk of export restrictions from the Black Sea region were quashed on Wednesday, leaving the markets to give back, and some more, the previous day’s gains.

US markets have also been watching reports of the crop tours across the key US corn growing states, which mostly forecast the likelihood of bumper yields. This should provide enough data to see an increase in the USDA yield number in September.

EU markets have retraced back to trading just above contract lows as traders are still trying to work out what quality the EU has. Reports that 30% of the German crop is still in the field is increasing concern and potentially raises the volume of ‘feed grade’ wheat within the EU.

The quality issue also seems to have spread east into Ukraine, where 40% of that country’s crop is reported as only feed quality, and also partially into Russia. It will be interesting to see who offers the spec and at what price at the next Egyptian tender.

The UK harvest has now turned into a stop-start affair as growers dodge showers. With progress varying across regions, spot markets are driven by who wants the wheat, who has the wheat, and who can get the transport. Further rain delays increase the potential loss of quality – in some areas over 50% remains uncut.

In summary, there is very little fresh news to talk about. Crops aren’t getting smaller, but quality remains a key factor. Tightening of Black Sea financing, combined with a currency low, should continue to see increased farmer selling to obtain cash. This in the long-term could play a major role in the 2015/16 planting campaign – do farmers have enough finance to plant and grow a crop? As mentioned last week, markets have retested contract lows, but seem reluctant to push lower…. for the moment.

• USDA crop tour reporting bumper yields – analysts believe USDA is too low on yield but may be too high on area.
• Strategie Grains hikes EU soft wheat production to 144.1mln t, warns of lower overall quality.
• German farmers association DBV forecasts 2014 wheat crop at 26.2mln t despite rain. Concerns over quality as 30% remains uncut.
• Record Indian 2013/14 grain harvest to help government face rain deficit for 2014/15.
• Kazakhstan expects smaller grain crops in 2014 – seen restricting volume of grain exports.
• Buenos Aires Grain Exchange sees Argentine 2014/15 corn plantings down 10% to 3.2mln hectares due to low international prices / high sowing costs.
• Russian farmers accelerate grain sales as loan costs surge.
• Ukraine grain exports reported at 3.3mln t as of Aug 14 (includes 1.34mln t barley / 1.55mln t wheat).
• Ukraine Ag Ministry reports wheat harvest virtually over – 23.8mln t in bunker weight – 40% feed quality (25% last year).