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

Despite weather concerns, currency swings and bouts of short-covering by funds, it took USDA’s latest prospective planting and quarterly stocks reports to send the market lower – for a day at least.

USDA predicts US farmers will plant 89.2mln acres of corn. Although above trade estimates it is 1.4mln acres down from last year. In addition, larger-than-expected quarterly stocks point to a slow-down in demand for US supplies, both domestically and for export.

Wheat numbers were much in line with trade estimates, but moved lower as corn fell after the reports. US supplies remain overpriced due to a firming US dollar, leaving the potential for further increases in US stocks.

EU prices, down €0.5/t on the week, are actually down $4.5/t as the dollar rebounded from its recent dip. Export pace remains strong, with shipments now reaching 25.5mln t, against 23.3mln t this time last year.

However, many believe this pace will ease as harvest approaches in key importing countries.

Russian exporters have again asked government to remove the export duty early to allow new sales of excess wheat stocks, but this is unlikely to happen until a better assessment of new crop prospects can be obtained.

New crop EU wheat prospects remain favourable, and although production is being talked lower increased carryout stocks would offset that, keeping available supplies plentiful.

The UK market continues to see good spot demand and limited producer selling, which is keeping prices firm in the spot position and extending delivery premiums. However, there is no interest past the current month, unless covering a forward feed or flour sale.

DEFRA has raised the UK’s exportable surplus in its latest update, mainly on reduced domestic demand and higher imports.

UK supply resembles an iceberg – the peak is visible in the spot position, where consumers and market shorts are having to pay what it takes to cover their needs, but the mass of supply is still hidden away from sight. While growers seem to be trying to avoid a collision, the market in the long-term may take a direct hit and sink.

There is an attractive looking market carry to November 2015 from July old crop. But how many farmers will be willing or able to roll wheat to a new crop position, and if they do will they remember to sell it?

In summary, USDA released more bearish numbers than bullish, while Black Sea exporters seem to be getting a bit more nervous over missing trade as the export uncertainty (from Russia) remains.

Weather will continue to provide market direction, as over the next six to eight weeks the market enters a crucial period with the planting of US corn and soy crops.

Major market volatility remains a probability in the US given the size of the fund short, so at this time a weather forecaster is probably more valuable than a trader.

• Russian exporter group asks for wheat export tax to end early to allow sale of excess wheat stockpiles in south.
• Analyst SovEcon forecasts 2015/16 Russian grain crop at 93mln t (wheat forecast at 53mln t).
• Ukraine grain exports reported at 26.8mln t so far this season (includes 9.8mln t wheat, 12.7mln t corn and 4.1mln t of barley).
• EU Commission raises feed usage for 2015/16 by 2mln t, soft wheat stocks reduced by 2.5mln t but still projected at 16.2mln t.
• DEFRA raises UK wheat supply forecast on lower domestic use and larger imports.
• USDA reports prospective US corn and wheat plantings at 89.2 and 55.4 mln acres respectively – down on last season but corn higher than expected.
• EU to retain title of top wheat exporter in 2015/16.
• US markets continue to rally and fall on dryness concerns in US plains. Also element of fund short-covering ahead of long weekend.
• International Grains Council reports grain output to fall in 2015/16 as yields ease after past bumper seasons – wheat production down 10mln t at 709mln t.
• Around 40% of the winter grain crop in Russia’s Volgograd region reported in poor condition, 20% rated good.