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

The surprise of lower-than-expected US and global wheat stocks set the market tone over the past week, as market shorts increased their buying activity. The ongoing US corn harvest is being delayed as the crop struggles to mature in the northern states due to adverse weather, potentially lowering production.

US wheat remains over-priced against other origins, although sales have been steady to traditional destinations and Brazil, where demand is likely to reduce as South American wheat harvests become available.

EU markets remain unchanged on the week, pressured by a firmer €/US$ exchange. EU exports, as reported in previous weeks, march on at last season’s pace. However, this is unsustainable from most of the current origins. France managed to price itself into more Egyptian trade, although the sale of a Russian cargo may point to more aggressive offers from the Black Sea in future tenders. Wheat crop estimates are increasing along with corn, reiterating the increasing supply of coarse grains across much of the northern hemisphere.

The UK has managed positive gains in the past week, with LIFFE up £4/t, supported by buying interest and a weaker £/€ exchange. Economic data released this week suggest interest rate increases will be later rather than sooner. Good spot demand has allowed farm values to rise off a four-year low, although with DEFRA reporting  the UK wheat crop at 16.6mlt t and imports still running ahead of exports, the recent rally may be short lived.

In summary, there is still plenty of wheat in the UK, EU and Black Sea region. The US is heading for higher stocks, Canada’s export surplus is only slightly down on last year despite the much-reduced crop, and Argentina will be an aggressive exporter this season. Australia remains the only question mark, where dryness continues to put the crop at risk.

• Black Sea 2015 winter plantings progress – Ukraine 81% complete (6mln ha) / Russia 92% complete (15.2mln ha).  
• Russian Ag Ministry reports grain production at 103.5mln t (92% of area) – exports as of 8 Oct put at 12.48mln t (10.5mln t of wheat). 
• Ukraine’s grain exports reported at 9.5mlt t as of 4 Oct – including 5.7mlt t wheat and 3mlt t barley.
• Ukraine Ag ministry reported 2014/15 grain exports at a record 33mlt t.
• US funds still short – profit taking on any weather or supply problem.  
• Coceral estimates the EU wheat crop at 155.3mlt t, up 7.4% year on year.
• USDA cuts US and global wheat stocks despite higher crops – US global corn production at record.
• UK wheat imports rise in August to 228,720t – exports also rise to 129,689t.