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

Markets continue to drift lower, despite severe cold weather entering the US plains. US exports remain routine, although in recent tenders the US has managed to tap into Egyptian business.

The overall bearish sentiment of ample grain stocks and mainly favourable weather conditions prevailing over winter crops in the northern hemisphere continues to dampen any potential price rally.

With US winter wheat plantings lower than expected, any potential losses due to the extreme weather, especially on hard red winter (HRW) wheat, may encourage some buying interest.

European markets have seen good buying interest on the recent price dip, with certain key major importers (Egypt, Iran, Iraq and Algeria) all recently extending cover. Most are now well covered for the first quarter of 2014.

The re-emergence of Russia and the Ukraine continues to hamper French wheat prospects leading to crop bureau FranceAgriMer lowering its projection of French non-EU exports for the season by 300,000t as competition increases. Despite this setback EU wheat exports are still running about 5mln t ahead of last season, and with continuing shipping being executed from the Balkan states, this season remains on track to break all export records.

Reports of EU consumers switching demand from wheat into cheaper corn also add to the negative sentiment weighing on wheat values for the rest of the season.

The UK market has remained flat over the past week despite a firmer currency. Official data showed, as expected, a slowdown in the pace of wheat imports, reported at 129,483 t for November, bringing the season-to-date total to 1.18mln t, slightly ahead of last season’s 1.03mln t.

UK wheat exports rose in November to 70,816t, the highest so far this season, but with cumulative exports of 165,575t, this is sharply down from the 476,996t in the year-ago period.

In summary, increased export competitiveness of other Third country origins continued to exert pressure on the European market. Weather concerns are mainly concentrated within the US; other northern hemisphere producers report favourable conditions and winter crops in good condition, boosting new crop prospects.

With global supplies growing over the past months, the likelihood of another bumper 2014 crop will keep prices on the defensive, unless a major weather/crop problem develops.

Wheat

• Ample northern hemisphere grain stocks and generally favourable weather dampen potential price rallies.
• Most European home and export markets covered for first quarter.
• FranceAgriMer lowers projection of French non-EU exports for season by 300,000t as competition increases.
• EU consumers reportedly switching demand from wheat into cheaper corn.
• Potential losses due to extreme cold in US plus lower winter wheat plantings could encourage buying interest.