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

The markets remain under the grip of weather and politics. US wheat has firmed $13/t over the week, supported by ongoing weather concerns and declining US winter wheat crop ratings.

Scouts on the annual wheat tour reported yield potential in the northern parts of Kansas the worst for 13 years, following months of drought, a near Arctic winter and the mid-April freeze. Reports from Colorado and Oklahoma projected crops in better condition, but with no more than average yields prospects.

The US corn market has also firmed, but only by $3/t, supported by the slower-than-average planting pace, although at 19% complete this is still ahead of last year.

The political situation in the Ukraine remains a concern with pro-Russian separatists occupying Ukrainian buildings, and Moscow threatening Kiev if excessive force is used against their own people.

EU markets have remained extremely quiet. MATIF is unchanged despite EU soft wheat exports now reaching over 25mln t for the season. New crop prospects remain favourable, especially with the recent rains seen across western Europe and parts of the east, moving into Ukraine and southern Russia.

Black Sea spring sowings continue to progress and, with winterkill losses seen lower than average, wheat production could match last season’s figures despite the reduced winter area.

The EU’s first award against its 950,000t duty-free quota on Ukrainian wheat and flour seemed to go under the radar, but this could be a significant market changer for EU wheat values over the next few months.

Like the MATIF, the UK LIFFE market is also unchanged on the week, although delivered premiums remain under pressure in the spot as increased selling activity meets limited demand requirements.

In summary, it’s all about weather and politics. The US scenario is well documented, although US farmers are well geared to ramp up corn plantings given the weather window they require. Global crop prospects in general remain favourable, with ending stocks at the end of 2014/15 being similar to those of this season.

Weather and politics will control the short-term, but market fundamentals, if allowed to dictate, are likely to pressure levels in the medium/long term, assuming normal weather and crop development.

Wheat

• Ukrainian spring sowings are 56% complete as of 28 April (4.7mln of intended 8.4mln ha).
• Ukrainian grain exports reach 29.4mln t as of 28 April  – its agriculture ministry still plans to export around 33mln t.
• Canadian farmers are planting less wheat in 2014 (24.8mln acres), which is above trade estimates.
• Russia’s Ministry of Agriculture predicts a maximum 5% winter grains losses (10yr average 9%); this should cover any shortfall in spring plantings.  
• The Argentine government approves an additional 500,000t of wheat exports.
• EU awards licences to import 9,139t of Ukrainian wheat and flour, the first award of a new 950,000t duty-free quota.  
• US markets firm on crop ratings/slow planting pace and weather concerns.
• US winter wheat crop ratings decline – 33% reported as good/excellent, 44% reported as poor/very poor.  
• International Grains Council trims global 2014/15 wheat and corn crop forecasts citing US sowing delays for corn reduction.