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

The trade welcomed in the new year to the news of further export restrictions imposed by the Russian government. On top of increased quality criteria and higher rail costs, an export duty of €35/t on wheat was placed to take effect from 1 February until 30 June. This will be enforced on exports to all countries except Egypt, Turkey, Armenia and Syria.

Many had believed that any duty would have to be imposed immediately, but it looks as though Egypt’s expectation that all Russia’s January sales would get shipped may have swayed the delay on the commencement date. With the USDA report due to be released next week, the trade will watch to see how the Russian export number is adjusted and, perhaps more importantly, to where it is re-directed.

The EU market, initially supported by the Russian news, has retracted from its recent highs, although the weakness of the euro is still providing some support. The move to a nine-year low against the US dollar, due to Greece potentially dropping the currency and ongoing political and economic concerns, is seen as supportive to prices, making exports cheaper on the global markets. EU exports (soft wheat) were reported at 14.6mln t to the end of December, just ahead of last season’s record pace. Concerns continue to rise over the ability to sustain this pace, especially on better quality exports into North Africa and the Middle East

UK prices have followed the global trend although, like EU levels, they remain supported by a weaker currency versus the US dollar. End-users continue to trade spot requirements only, knowing there is an apparent oversupply in the UK balance sheet and that there are competitive alternatives, whereas growers still seem reluctant to chase the market lower and sell.

In summary, one of the major supportive factors, Russian export restrictions, is now factored into prices, therefore bulls will need fresh news to push markets higher. Currently the weather in the US/Black Sea is the major supportive element, with colder weather expected to stress crops further. These concerns will linger on for several weeks yet, as US crops will not re-emerge from dormancy until the spring, when better assessment can be made of potential yields.

The USDA next week will also release initial US winter wheat planting estimates, with the trade looking for an increase on last season. As in previous reports, current issues are likely to underpin the markets, although the long-term supply scenario remains bearish – which the USDA should confirm.

• Ukraine grain exports reported at 19.6mln t as of 6 Jan – including 8.2mln t of wheat. Total exports predicted at 33mln tonnes 
• USDA expected to project burdensome stocks report next week – levels to be similar to previous month’s report
• US crop concerns support wheat market as colder weather threatens – US winter wheat crop rating deteriorates 
• Russian government imposes €35/t export duty on wheat from 1 Feb to 30 June
• Argentine government reportedly announces it will not issue further export licences as traders are not meeting current quota
• Euro slides to nine-year low against US dollar – viewed as supporting EU prices.  
• Weather boosts hopes of bumper Indian wheat crop – stocks reported at three times government target