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

The USDA threw few crumbs of comfort to potential market bulls as the numbers in its recent report were within trade estimates and confirmed ample global supplies.

Recent, much-needed rain saw the market shed $10 on the week. While these rains will bring much relief to drought-stricken areas, they could also delay corn plantings if fields remain too wet to work.

Despite the rains, US wheat crop ratings slipped on the week with the national crop reported at 42% good/excellent condition, down 2% on the week, but still above the 34% of a year ago.

Corn plantings have only just begun, so there is still ample time to get the crop planted. However, some earlier southern states may now look to switch to soybeans as the optimal planting window closes.

EU prices followed Chicago lower, trading down €4 on the week. EU exports slowed to just 189,000t, the lowest weekly figure since last July.

The lack of exports has driven Russian internal prices lower and, despite being below state intervention levels, little is being offered. The Russian government now states it will make a decision in May or June on extending the export duty.

While this prolongs new-crop market uncertainty, it will allow the government more time for better assessment of new-crop prospects – as well as the potential for further erosion of interior prices.

Strategie Grains, while lifting its 2015/16 EU soft wheat forecast, warns removal of Russian export duty could harm EU wheat prices, saying ‘values could have significant downward potential to maintain a high level of exports’.

The UK market, down £2 on the week, has been affected by the firming pound, which leaves wheat exports less competitive, both in US dollar and euro terms. Spot delivery premiums defy gravity as merchant shorts chase limited offers from growers.

UK exports for February were reported at 267,000t, a three-year monthly high boosted by the biggest non-EU monthly shipments since 2000. That said, the pace of shipments remains well below the level needed to avoid a heavy build-up in stocks.

In summary, weather and Russian politics will continue to drive the markets, and if you can correctly guess the outcome, you are in the wrong job! Fundamentally, there are ample supplies – a strong dollar will keep US exports on the defensive, increasing the likelihood that US stocks will end the season well in excess of 700mln bushels, and Russian/US weather has improved prospects over the last week.

USDA data gave no reason for the major short (Chicago funds) to exit their record short position, but at some stage they will, and how that affects the market is still to be seen!

• US wheat prices continue to decline as needed rainfall arrives in key producing areas.
• Russian 2015-16 wheat export potential put at 19mln t (wheat stocks at 8.8mln t, up from 5mln t a year earlier).
• Strategie Grains lifts EU-28 2015/16 soft wheat estimate by 1.1mln t to 141.5mln t – warns removal of Russian export duty could harm EU prices.
• Asian purchases lift UK monthly wheat exports (February) to a three-year high but export pace still seen as lagging.
• Morocco increases import duty on wheat to 75% from 1 May to protect local markets in light of record production prospects
• Russian Ag minister states decision on extending wheat export duty will be taken in May or June.
• USDA reports US winter wheat crop ratings down 2% on the week at 42% good/excellent – still above last year’s 34%.
• Ukraine’s Ag minister reports wheat production could decline to 20mln t compared with 24.1mln t this season (total grain production at 55-57mln t).