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

Another week of markets re-testing both contract and multi-year lows, as dry weather is seen speeding up US corn and soybean harvests. The move to a new low in Chicago has seen some short-covering enter the market prior to the US quarterly stock report due to be released next Tuesday. The sale to Egypt of 55,000t was, like the French sale the week before, a ‘bargain offer’ as the price was below replacement. US prices still remain at a hefty premium over other origins on the export markets.

EU prices (futures) have continued to slide as the MATIF falls to what is, or might be, feed wheat! Reports that 17mln t of this year’s French soft wheat crop is third grade (4.3mln t last year), and that only 46% of the crop has Hagberg numbers over 220 (99% last year), shows the quality issue facing the French this season. Export silos are full, and EU exports licences, although running in line with last year’s record pace, are mainly confined to German and Eastern EU origins.

No real change in the UK market this week with buyers, when you can find them, purely concentrating on nearby requirements. The Scottish no-vote saw the expected rise in sterling, a move that is deemed negative to UK wheat values.

In summary, everyone is looking for the floor to this market. The world does not have an overall supply issue regarding wheat, but may have a serious quality issue later in the campaign. The recent rise in Black Sea values has resulted in Russia losing its competitive edge in global export markets, as German and Baltic wheat moves into prime position, but ones asks the question for how long?

Russian intervention is due to commence next week, with talk of 5mln t being ‘purchased’. Russia will have to export more wheat, but at current prices buyers will shop elsewhere, therefore further price reductions are needed to encourage buyers. This could be the next catalyst for lower global prices.

Wheat:

• Agriculture and Agri-Food Canada estimates Canadian all-wheat production for 2014 at 27.71mln t, in line with current projections.
• Russian grain exports reported at 9.9mln t as of 17 Sept, up 26% including 8.6mln t of wheat, 1mln t of barley.
• Russian harvests 90.8mln t of grain as of 22 Sept off 75% of total intended area (wheat 54.8mln t bunker weight).
• Ukraine’s grain exports reported at 7.4mln t as of 19 Sept, including 4.3mln t of wheat, 2.6mln t of barley.  
• Ukraine harvests 39.6mln t of grain as of 22 Sept, up 15% year on year – total harvest seen at 63mln t.
• Argentine Ag ministry projects sharp drop in 2014/15 corn plantings – expected area to fall to 5.6m ha (down 8%).
• Egypt’s state buyer GASC purchases 55,000t of US soft red winter wheat for 20-31 October shipment.
• Ukraine’s grain stocks reported at 23.4mln t as of 1 Sept – up 15% year on year. 
• Strategie Grains raises EU-28 2014/15 soft wheat production to 146.6mln t, up 2.5mln t from last month and 10.1mln t year on year.
• Strategie Grains raises EU-28 corn production to 71.3mln t, up 3.1mln t from last month and 7.1mln t year on year.
• Frosts hurts immature northern US corn, soybean crops more than initial estimates.