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

The US markets continue to drift as an improving weather outlook keep fund longs in ‘sell mode’. Winter wheat crop ratings improved slightly on the week and the favourable weather saw US farmers push on with spring plantings.

With 88% of the intended corn area now planted (approaching 95% by end of this week) earlier concerns over sowing delays have declined, although spring wheat planting remains behind the five-year average, mainly in the northern states.

Although US wheat has shed 90c/bushel (£20/t) since the bearish USDA report on the 9 May, at current levels US wheat is going nowhere except lower, given its price differentials compared with other origins.

The EU markets have followed the US lower, trading down €5/t on the week. Soft wheat exports for the season are reported at 26.4mln t compared with 17.9mln t a year earlier, and on track to meet the 30mln t (all wheat) projection.

With Black Sea spring plantings progressing well, and the region’s export projection for 2014/15 increasing, EU exports will remain under threat, especially throughout the harvest period as Black Sea farmers looks to offload supplies into export markets. The reports that Egypt is looking to revise its wheat import terms (relaxing moisture tolerance) is seen as supportive to French prices, as the current maximum 13% is not generally achievable.

UK values are slightly lower on the week, currently trading £2/t lower with some support from a slightly weaker currency. End-user demand is still far from robust with many waiting for lower values before extending coverage. Farmer selling also remains slow.

In summary, another week has passed, Northern Hemisphere harvests are getting closer and farmers (across much of the EU) have sold little, even in the heat of the first signs of Ukrainian unrest.

US wheat (Dec14) is still greatly overvalued against other origins. Markets have fallen without any significant farmer selling and the main market drivers have been improving weather / crop outlook for the 2014/15 season. At some stage producers must come to the market, and this includes farmers in the Black Sea region. Even though we are already at last year’s harvest lows, we may not have yet witnessed the bottom of the 2014/15 season.

• US farmers increase planting pace – 88% of expected corn area and 74% of expected spring wheat area now sown
• Ukraine’s 2013/14 grain exports have reached 30.9mln t since 1 July versus 23mln t a year earlier 
• Russian (medium sized farms) have planted 71% of intended spring wheat and 93% of corn area
• Russian Ag Ministry raises 2014/15 grain export view to 25mln t, up from 22mln t previously
• Hot and dry weather raises risk for Russia’s grain harvest – crops seen as suffering if rains fail   
• Egypt’s state buyer GASC could revise wheat import rules, raising hope for French supply
• Ukrainian farmers are thought to have planted 7.9mln ha of total anticipated spring sowings of 8.4mln ha
• Asian governments seen preparing food security programs against potential El Nino threat