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

The US continues to set the tone for international markets, as a progressing winter wheat harvest, ideal Midwest weather and good crop ratings weigh on prices.

After initial poor results in the southern plains, as expected, reports of improving yields as the harvest moves north has seen another $8/t drop in new crop levels, pushing through previous contract lows. In addition, ideal weather for the US corn and soybean crops continues to support the aggressive yield projections of the USDA.

The recent tender by Egyptian state buyer GASC resulted in another 240,000t trade from Romania despite further weather/quality concerns. No US wheat was offered; however, the price paid (around $250/t fob) was only $2 lower from the previous tender on a market that has moved down $8/t.

EU markets are all focused on the impending harvest and weather. Black Sea harvests have accelerated during the past week, as has farmer selling, easing rising prices.

Crop estimates for France and Germany have been revised to 36.5mln t and 25.0mln t respectively. Traders are keeping a keen eye on current French harvest activity. There has been heavy rainfall in parts of the west of the country – this may affect yield and quality, but it remains too early to judge.

UK prices remain on the defensive, falling just over £2/t on the week. New crop prospects remain favourable, with many now projecting a wheat crop approaching 16mln t, and some over this figure.

As usual with harvest a matter of weeks away, weather here on in will play a major role in final output and quality. Old crop prices continue to weaken on impending new crop supplies with values about £7-8/t weaker on the week – and this will continue to weaken further as we move towards harvest.

In summary, markets still have more downside, but when you are already at contract lows, how much more downside is there? UK values still remain hindered by a firm pound, and the USDA report later today will probably confirm larger US wheat/soybean and another bumper corn crop. In the short term, the market looks set to remain bearish, which may reverse once harvest, and its expected pressure, is removed.

• ‘Rain makes grain’ is what the Americans are saying – the US Midwest is set for big crops and US stockpiles are expected to climb   
• Russian Ag Ministry puts 2014/15 grain crop at 94-99mln t with exports rising to 27-30mln t (25.37mln t in 2013/14)
• Russia’s harvesting gathers pace, easing concerns over wheat quality and halting rise in domestic wheat prices  
• Egypt’s state buyer GASC purchases 240,000t of Romanian wheat for 21-30 August shipment
• UK farmers lift wheat area for 2014 to 1.96mln hectares, up 22% on 2013    
• Rosario Grains Exchange lowers its forecast for Argentine 2014/15 wheat area to 4.24mln hectares, down from 4.4mln
• India suspends efforts to increase wheat exports on concerns that a weak monsoon could reduce production  
• French farm ministry forecasts 2014 soft wheat crop at 36.51mln t, down 1% on 2013 despite higher area.