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

An increased threat of colder weather entering the US Midwest supported markets through the long weekend and early this week, before trading lower.

Reports that the USDA Agricultural Outlook Forum might predict a lower-than-expected wheat area for the US 2015/16 season also provided support, although analysts still believe that US 2014/15 wheat stocks will increase further due as exports remain uncompetitive. This was confirmed after Egypt cancelled a tender for US wheat despite using the $100mln credit line, due to the offered prices being too high.

EU prices, initially supported by the US move, have eased back in recent days as the realisation of ample stocks starts to weigh on sentiment. Despite the continued strong export pace (now including French feed wheat sales to Asia) and estimates that soft wheat exports will exceed last season’s record, stocks are still projected to rise year on year.

Russian exports have all but stopped since the export duty was imposed on 1 February. They are reported at 18.56mln t, with 1mln t still to be shipped on deals concluded before the duty was imposed. News that the Russian government will review the current duty once February's exports are known throws more confusion into the market. Traders are trying to second guess whether this means a possible extension of the duty if exports are too high, or a reduction or removal of the duty if the government feels comfortable with stocks levels and is more optimistic over new crop prospects.

UK values again followed global markets higher, only to fall in line with the other exchanges. Lower inflation and unemployment figures have boosted sterling in the past few days; existing export business will be executed over the next few weeks but the UK remains uncompetitive for further intra-EU trade.

Asian big-vessel feed interest continues to surface once in a while, although cheaper corn prices and impending sub-Asian harvests are expected to limit demand. The UK market is still governed by a general lack of farm selling but, with domestic usage and further exports trade far from robust, the UK still faces the likelihood of an above-average carryout of stocks at the end of the season.

News that one of the UK wheat-based ethanol plants is broken (yet again), and the other is undergoing prolonged maintenance could even mean record carryover stocks of wheat.

Milling premiums have eased back by a few pounds recently, pressured by low flour volumes and by a keenness to secure homes for wheat in the next month or so.

In summary, weather remains a key factor that could support the market at present. The weather is far from ideal in the US and parts of the Black Sea region, with recent cold spells putting new crop plantings under stress. Until crops have emerged from dormancy and better yield assessments can be obtained, weather scares will keep markets nervous.

There is no shortage of old crop supplies and, unless next season’s potential supply problems are realised as actual major crop losses, market rallies will remain limited and provide selling opportunities. The outlook forum may provide short-term support if the numbers are lower than trade expectations, but with the US uncompetitive even with a sole origin credit line, further increases in stocks may offset the lower planted area.

• US market falls on cancellation of special Egyptian wheat tender despite US credit line
• Canadian 2015/16 all-wheat production expected to rise 700,000t year on year to 30mln t
• Ukraine’s Ministry of Economic Development increases 2014/15 export forecast to 37.9mln t, including wheat at 12.8mln t (USDA at 11mln t)
• Ukrainian grain stocks as of 1 Feb reported at 22.3mln t, up 14% on the year
• Market analyst SovEcon reports Russian 2014/15 wheat exports could reach 20.5mln t
• Russian wheat exports slow after duty imposed – 18.58mln t exported as of 11 Feb with a reported 1mln t still to be shipped in February
• Crop consultancy Strategie Grains lifts EU wheat exports to new record
• French wheat export outlook raised on feed demand from south-east Asia.