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

US markets have firmed this week as deteriorating crop conditions in the southern plains and concerns about dry weather triggered a bout of short covering. Chicago wheat has bounced off a multi-year low, moving up $11/t (£6.75/t) in three trading sessions.

Lower than expected HRW wheat planting numbers released by the USDA last month are supporting the rally and any potential losses in acreage/yield will support further short-covering. Weather concerns in South America are also supporting corn values as local production estimates come in below USDA projections.

EU markets have followed the firmer global market although, after the recent surge in export interest, this week seems calmer. Severe weather has disrupted shipping from key Black Sea ports, but exports are expected to resume soon. EU exports continue their strong pace, with 17.23mln t of export certificates issued as of 31 December, sharply higher than the 11.27mln at the end of 2013.

The UK market, like others, has firmed, moving up £3/t over the past week, supported to some extent by a weaker exchange rate. Domestic demand lies in the hands of a few buyers, with end-users in general not looking to extend cover.

Offers of cheaper alternative feed ingredients continue to displace wheat in feed rations and, with industrial use lower than previously expected, the supply balance is starting to grow. New crop levels have also increased over the week, but while this is providing some end-user interest (at £10-£15/t below old crop) growers seem less enthusiastic about selling.

In general the US weather has provided a spike in the new crop (late May harvest) market. Old crop supplies are plentiful and over the next few months could increase further as wheat demand wanes. EU markets are caught between the strong export pace and ample global supplies, and the UK is just a follower of other markets. Fundamentally the bearish slant still weighs, but this week’s price action just reiterates how short / jumpy the market is!  

Wheat

• The Ukrainian Agriculture Ministry reports 58% of winter crops in good condition and 34% satisfactory.
• The Russian Ministry of Agriculture reports 65% of winter crops in good condition and 31% satisfactory. 
• Canadian all-wheat stocks (2013/14) are put at 28.38mln t, up 20.61mln t year-on-year.  
• International Grains Council (IGC) raises global 2013/14 corn and wheat production/stocks.
• Egypt’s change in buying spec is threatening exports from France  – the French plan to lobby Egyptian authorities.
• US markets rise as hard red winter (HRW) wheat crop ratings deteriorate.