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

The market has been on a roller-coaster ride this week, initially supported by a cut in the forecast for the Australian 2014/15 wheat crop, ongoing weather concerns and reports that proposed tighter export regulations could reduce the amount of Russian wheat made available for export.

In addition, as the rouble continues to decline, talk of imposing export tariffs, if needed to protect domestic supplies, added support. However, this action has been questioned by various trade groups lobbying the government, saying there is no need to curb exports, resulting in the market easing back.

EU markets firmed to a six-month high on the Russian news, supported by the strong export pace. French wheat again was the cheapest offered at this week’s Egyptian tender, but eventually lost out on freight. German premiums are now seen at parity with Russian, although Polish wheat is still offered at a discount. US wheat still remains highly priced, and apart from routine trade into Latin America and Brazil (lack of Argentine exports) it is struggling to compete on the global markets.

The UK market has also moved higher, although the December short market seems to be getting sorted. Higher prices still deter end-users from extending coverage, and farmers, buoyed by firmer prices, remain reluctant sellers.

In summary, the market is all about perception. The Russian export issue is not going away, as with almost 65% of wheat exports shipped by the end of November, the current export pace will also have to be curtailed, officially or not! Everyone has an opinion, but only Moscow knows the answer. Given that another 4mln t may be shipped by the end of January, any government restrictions would, based on USDA numbers, put about 5mln t at risk. The likelihood is that this lost export tonnage could be sourced from other origins. This could be another ‘buy the rumour, and sell the fact’ market and it is extremely volatile!

• Russian grain exports reported at 17.68mln t as of 26 Nov – including 14.2mln t wheat, 2.5mln t barley and 0.8mln t of corn.  
• Egypt’s state buyer GASC purchases 175,000t Romanian/Ukrainian wheat for 1-10 January shipment – French offered cheapest (FOB) but lost out on freight.
• IGC raises global 2014/15 corn crop estimate by 2mln t to 982mln t, but trims wheat estimate by 1mln t to 717mln t – still a record crop.
• Global wheat market had firmed on talk of tighter export regulations/tariffs on Russian wheat - analysts see ‘substantial fall in exports’.  
• Analyst SovEcon estimates Russia 2015 grain production at less than 90mln t – winter crop conditions ‘worst on record’.
• Ukraine grain exports reported at 14.9mln t as of 27 Nov – including 7.3mln t wheat, 3.3mln t barley and 4.0mln t of corn.
• Market researcher ABARES trims Australian 2014/15 wheat crop forecast by 1mln t to 23.25mln t.