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

US markets were mixed over the past week, with corn unchanged and wheat lower. US winter wheat harvest is reported at 33% complete (five-year average is 31%) with progress being slowed by heavy rainfall.

With the confirmation of mixed yields, especially in the drought-stressed hard red winter (HRW) areas, and rain potentially affecting quality in the spring crops, some signs of support for the quality US markets (Kansas Board of Trade and Minneapolis Grain Exchange) has emerged, although US wheat remains at a heavy premium on the international market.

Corn values have stabilised on trade expectations of a cut in the planted acreage in Monday’s USDA report and, with slightly lower crop ratings, would point to a lower production figure than the current USDA projection - but by how much is unclear as the balance sheet remains more than adequate!

EU wheat markets are down about €2 on the week, as harvest looms on the horizon. The adage ‘big crops just keep getting bigger’ could apply to this year’s EU wheat crop following Coceral’s release recently.

Reports that the Balkan states should see record crops along with reports that Russian new crop grain sales are ahead of usual levels, as a combination of a decent harvest outlook and a credit crunch prompts farmers to sell, points to the likelihood of further price declines.

The two recent Egyptian tenders (late July/early August shipment) were cleared up by Russia and Romania, and this should remain the trend for the next few weeks as cheaper supplies enter the export markets. Ukraine, and of more interest France, have few harvest sales on the books to accommodate what could be, a very big, early wheat harvest.

The UK market has been quiet, trading about £1/t lower on the week, supported by consumer/trade buying and a general lack of farmer selling. Sterling remains strong at over $1.70 and this level is still seen as negative to UK values for exports, a market that the UK will need to get back into this season. The current 2mln t exportable surplus shows signs of increasing as crops prospects remain positive, and the projection of increased domestic usage is far from a done deal.

In summary, the reports released next Monday by the USDA should show lower US corn acreage, but possible increases for wheat and soybean. US weather is seen disrupting wheat harvests, and potentially lowering yield/quality prospects for spring wheat and corn. However, this remains strictly a US problem, with harvest now commencing in the Black Sea and yields above last season. Lower numbers from the USDA, although expected, should support the market short-term, but the medium/long term price direction remains negative on the assumption of bumper global crops.

• USDA report increases US wheat/global wheat and corn stocks in monthly update  
• Ukraine’s 2013/14 grain exports seen at 31.9mln t as of 20 June (wheat 9.2mln t, barley 2.4mln t , corn 20.0mln t) 
• Russian new crop wheat prices decline ahead of harvest on increased farmer selling
• Egypt’s state buyer GASC purchases 180,000t (120,000t Romanian, 60,000t Russian) – shipment 1-10 August
• Chinese market information provider CNGOIC sees 2014 wheat and corn production at 122.5ml t and 223mln t, up 0.5% and 2.0% respectively   
• Coceral lifts 2014 EU soft wheat harvest estimate to 141.9mln t, up 6mln t from its March estimate
• EU’s Black Sea neighbours eye good milling wheat crops – Romania and Bulgaria seen keeping exports strong in 2014/15 
• US harvest progressing but slowed by rainfall – HRW wheat areas reporting mixed yields, higher proteins   
• Egypt domestic wheat purchases seen at 3.7mln t – lower than an initial 4.4mlt target – need for increased import?    
• Brazil approves import of 1mln t of non-Mercosur tariff-free wheat through 15 August