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

Another week of the same market shorts supporting the short-term, while long-term bearish fundamentals remain intact. Harvest delays with US corn and soybean crops have encouraged some buying interest as analysts look at the potential for delays to trim harvested acreage and yields. US wheat still remains heavily priced and no offers were made in the recent Egyptian tender, although it appears the US is willing to wait for the ‘long game’ to develop thinking that export demand will switch when other origins run short.

EU markets have firmed with MATIF up €11 on the week, not supported by the GASC tender, but on the technical delivery situation, although cash premiums remain very firm despite the recent rally. GASC ‘picked-off’ the distressed French offer in its tender, with additional French offers in line (fob basis) with Russia.

More detailed harvest estimates are coming from the Black Sea, with the Russian wheat crop now seen by many to be over 60mln t (clean weight) and Ukraine’s crop projected by the ministry at 23.7mln t. Both these figures would allow additional exports. Although the drop in quality of the Ukrainian crop could add support to the milling sector, this just adds to the already burdensome coarse grain supply across the northern hemisphere.

The UK has also managed positive gains this week, trading about £2/t higher despite the recent surge in the pound against the €. Spot ex-farm prices continue to firm as merchant shorts look to cover against the backdrop of grower’s reluctance to sell into the rally. At present the market does not feel like it is trading a 16.7mln t wheat crop, and the current illiquidity of supply along with the rise in sterling is seen as detrimental to the UK’s export potential, a factor that must kick in to allow the UK to limit the potential of an above average carry-out.

In summary, the factors of farmer retention, widespread across the EU, and decent spot demand seem to have set the market lows for the time being. However, the longer-term bearish fundamentals would still point against a major rally in wheat prices. The current market sentiment is sweeping everyone along with it, and it is extremely difficult to swim against the tide. However, at some stage the tide will turn and this rally may prove to be a major selling opportunity for the grower.

• Buenos Aires Grain Exchange reports Argentina’s 2014-15 wheat crop could top 10.1mln t based on sowings of 4.1mln hectares.  
• Russian Ag Ministry declares grain exports as of 15 Oct at 13.3mln t, up 33% year on year (11.1mln t of wheat).
• Russian Ag ministry states 2015/16 winter grain plantings complete on 16.1mln hectares – 98% of the intended area.  
• Ukraine’s winter wheat sowing is 93% complete at 5.7mln hectares.
• US markets firm on harvest delay concerns and technical short covering.  
• Ukraine’s grain exports may hit a record 34.3mln t in 2014/15, including 11.7mln t of wheat.
• Poor weather has damaged Ukrainian wheat quality – only 54% is milling wheat compared with 75% last year.  
• Strategie Grains forecasts EU 2015 wheat area stable, at just over 24mln hectares.
• Egypt’s GASC purchased 180,000t of wheat for 21-30 November shipment (60,000t each from France, Russia and Romania).
• Informa reduces US 2015 all-wheat planting estimate to 56.4mln acres, down from 57mln previously.