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

US markets have weakened during the week as the advancing corn/soy harvests and prospect of record supplies weigh on prices. US wheat has also weakened, pressured by lower corn values, although weather concerns over the 2015 crops in both Russia and the US have limited the losses. In addition, reports that continued dryness in Australia will trim final production numbers, and the lack of any additional Argentinian export licences, continue to support prices. Fund managers are still short of US wheat although their influence is slowly diminishing.

EU exports continue at near record pace, supported by a lack of Black Sea wheat being made available for export, despite attractive prices due to the weakness of the Rouble. French stock projections have been trimmed recently due to an improved export outlook, but are still forecast at a multi-year high. Ukraine’s 2014/15 grain exports have been revised higher, and Black Sea wheat plantings are now complete, with the final wheat area higher than originally projected.

In the UK, the pre-Christmas short market is slowly being covered. Official data placed the UK as a net importer to the end of September, which with the recent rise in wheat prices and declining oil prices does not bode well for future domestic demand, especially from the industrial sector. With the festive break a matter of weeks away, growers will have to make major marketing decisions when they return in the New Year, as the likelihood of increased wheat stocks looms larger on the horizon.

In summary, the market is caught between good spot domestic / export demand, along with farm retention (bullish) and long-term fundamentals projecting ample stocks (bearish). The recent rally in the market hasn’t encouraged buyers to extend coverage, and likewise hasn’t encouraged growers to sell the market lower. As the markets move into 2015, it may be a battle of ‘who needs to move first – the end-users or the grower’.

One thing is for certain, northern hemisphere crops are now made, and apart from the final throes of the US harvests, are safely ‘tucked away’. Support for old crop prices had been driven from delayed US harvests, record US fund shorts and new crop weather concerns – well, one is now ticked off, one is slowly having a lower influence, leaving only the new crop weather concerns as the major supportive factor. And we are all aware how quickly a weather-related market rally can change – just go back to last winter and see how the market has ended up!

• USDA reports winter wheat crop ratings at 60% good/excellent, unchanged on the week and compared with 63% a year earlier. 
• Ukraine’s grain exports to 19 November put at 14.2mln tonnes – includes 7.2mln tonnes wheat / 3.3mln tonnes barley / 3.6mln tonnes corn – total exports raised 7% to 36.7mln tonnes.
• Ukraine’s 2015 winter wheat area reported up 5% year-on-year at 6.4mln hectares.
• Russia’s Ag Ministry reports exports to 12 November at 13.2mln tonnes wheat / 2.2mln tonnes barley / 0.66mln tonnes corn – total grain exports forecast at 30mln tonnes. 
• Strategie Grains raise EU-28 2014 soft wheat production by 300,000t to 147.7mln tonnes – exports estimated at 26.8mln tonnes with end stocks projected at 17mln tonnes.  
• France set for 1st big wheat export to US in 12 years - 45,000t of feed wheat to be shipped in next few weeks.
• Winter conditions hit US upper mid-west  – stalls corn harvest – may lose acreage / yield.  
• Drought to delay soy planting / harvest – may affect corn plantings.