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

Wednesday’s USDA report, despite reducing US corn stocks below trade expectations, did little for the market as global wheat stocks were increased by nearly 3mln t.

Larger stocks levels were reported for most major exporting countries and, with key importers also showing gains in inventories, the likelihood of a ‘fundamental’ price rally looks remote.

While US winter wheat crop ratings were reported at a 12-year low (which has supported the market), the figure of 35% good/excellent is only 1% lower than a year ago, from which a record US winter wheat average yield was produced. Likewise, increased talk of delayed corn plantings this season has also provided support, but again, one only has to look back one year for a similar scenario, and a final yield of just under 160 bushels/acre.

US prices slipped over the past week but EU levels increased by about €2/t, even with a firming € against the US$. EU exports continue the strong pace, with 2013/14 soft wheat exports reported as of the end of March at 23.3mln t, compared with 15.6mln t a year earlier. Despite this, French farm office AgriMer again raised its projection for French soft wheat ending stocks by 100,000t, citing a reduction in French exports as the main reason.

Spring sowings continue, with the Ukraine reported at 90% complete of the intended area and Russia complete on 1.3mln ha, compared with 775,300ha last year .

Like the EU, UK prices have also firmed, by £2/t over the week, despite Sterling firming against both the € and the US$. The recent rise in futures has eased back the ‘delivered premium’ in most areas, with signs of declining merchant short covering.

Fundamentally, the numbers remain mildly bearish – the USDA stocks/planting reports have come and gone, providing no fresh bullish impetus. Next month the USDA will release its initial 2014/15 US and world supply/demand estimates, and with thoughts that we will witness another 700+mln t wheat crop and 950+mln t corn crop, this hardly paints a bullish picture.

Until then, it’s all about weather, crop ratings, planting delays and whether the funds want to join the party or head for the exits – all this will provide is uncertainty, and that means volatility, both upwards and downwards!

Wheat

• USDA trims US/global corn stocks but raises US/global wheat stocks – supplies seen more than adequate.  
• Egypt’s state buyer GASC confirms it is not looking to amend its wheat import purchasing specification in the ‘short-term’ – seen negative to French wheat.
• French analyst AgriMer raises French wheat stocks for fourth straight month; keeps France’s non-EU wheat export forecast at 11.4mln t but lowers EU exports.
• US winter wheat crop ratings are affected by a brutal winter – USDA reports  35% of crop as good/excellent (lowest ratings in 12 years). 
• Egypt’s 2014/15 wheat imports to top 10mln t – Reuters poll.

• USDA Australian attaché report lowers Australia wheat production in 2014/15; exports are expected to increase to 19mln t due to carry-over stocks.
• Russia’s Grain Union sees 2014/15 exportable grain surplus at 25mln t (including Crimea) compared with 22mln t in 2013/14.