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

Another week where markets remain divided between reports of bumper US corn / spring wheat yields (although harvest remains delayed by rain) and tension in the Black Sea region, despite Ukrainian peace plans currently being discussed – albeit that as we go to press reports of a Russian invasion have spooked the market again.

Over the week, the US corn market is weaker given the potential of record production, although wheat has gained on quality issues (SRW) and harvest delays in spring wheat, which has supported the Kansas City Board of Trade, dragging up Chicago in spread trading. Current peace talks over the Ukraine don’t seem to have lessened aggression at ground level, which normally excite the markets at the end of a week – although to date the market gives it back by Monday.

European markets have remained steady over the week, as traders are still trying to understand what they have, and more importantly where it will go.

The blunt statement from Algeria threatening to reject mixed origin cargoes will make its next tender very interesting. The French will be unlikely to offer, the Germans are already heavily committed on quality sales to the Middle East, leaving the question, where do they buy it from?

The MATIF wheat futures contract remains surprisingly well supported given that most are unaware what quality they are actually trading. It rose around €3/t on the week, but with the spec only being feed wheat at best, many are questioning what exactly the MATIF contract is or stands for anymore – other than some sort of French farce.

The UK remains gripped by the current wetter weather, delaying harvest in many regions and potentially having a major impact upon overall quality, although to date it has held up surprisingly well.

We have seen photographic evidence of large amounts of wheat being stored outside at co-operative central stores. A sign of the size of the crop and the lack of an adequate export programme to move supplies off the market?  

In summary, a week without much fresh news to push the market either way. Good crop potential in the US keeps markets there under check, and in the EU, quality, or lack of it rules. Politics between Russia and the West, and what that means at ground level will provide market movements, both up and down, but fundamentally the market continues to be over-supplied, and, market lows will surely be tested again.

• US soft red winter (SRW) wheat crop reported as ‘variable quality’ including the highest levels of vomitoxin seen in the past 10 years.  
• Algeria’s state grain agency says it will reject blended cargoes containing wheat from different origins. 
• Australia’s western and eastern regions seeing less rain than expected – local crop forecasts being trimmed.
• Drought expected to reduce China’s corn output in northeast by about 3.5mln t – may increase import requirements.
• Markets continue to be supported, on an almost weekly basis, by continuing tensions plus reports of a ‘Russian invasion’ in south-eastern Ukraine.
• Russian Ag Ministry forecasts 2014/15 grain exportable surplus at 27.5-30mln t – with the crop ‘no less than 100mln t’.
• Russian grains exports as of 20 Aug reported at 5.86mln t, up 22.7% on the year (wheat accounted for 5.15mln t).
• Ukraine almost completes its 2014 wheat harvest at 24.4mln t (bunker weight) – about 5% less on a clean weight basis – Ag Ministry.
• Egypt’s state buyer GASC purchases 175,000t (60,000 Romanian / 115,000 Russian) for Sept 20-31 shipment – French wheat offered but about $7-10/t too expensive.
• Romania has reaped a record wheat crop of about 7.4mln t.
• Rain-damaged European wheat may hurt corn sales in Asia.