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

Wheat prices have fallen to a fresh four-year low on weak US export prospects and rising global supplies. The bearish stocks outlook in last week’s USDA report has followed through this week as traders digest the glut of coarse grains available in the 2014/15 season.

Although we have seen a spate of recent buying from key importing nations (Algeria, Saudi Arabia and Egypt), this has does little to stimulate the futures markets nor has it encouraged market shorts to trim their market exposure.

EU prices have been pressured by the apparent build-up in supplies, forcing one Euronext silo to stop intake against MATIF contracts. A 400,000t purchase by Algeria (traditionally a key French destination) was reported as being likely to be sourced from northern European/Baltic sea countries rather than France, due to harvest quality problems, and may partly explain the apparent ‘bargain’ price from France to secure the Egyptian business.

The UK is experiencing signs of a supply squeeze as a pick-up in demand has been met by a lack of supply. Growers who have, in some cases, just finished harvesting are preparing land prior to sowing. In addition, recently harvested crops are more than likely too moist and need drying further before being released from farm. This squeeze has allowed spot premiums to increase, but in general end-user demand remains lacklustre.

July saw the UK become a net wheat importer for the 26^th successive month, although after what should be a good quality harvest, and a likely record yield, this trend is unlikely to continue.

In summary, comments and market sentiment remains the same – bearish. There is a lot of wheat looking for homes, with the overhanging pressure of a record corn crop looming. Global bullish arguments are outweighed by bearish factors. The EU still has a quality issue – who has what quality and where will it go, while the UK is still heavily oversupplied.

• Russia on track to harvest second-largest grain crop in post-Soviet history and the largest for six years.
• Ukraine’s grain exports jump to 7mln t so far this season.  
• French wheat expected to miss out on Algerian trade – northern European/Baltic countries likely to win business.
• Australian research bureau ABARES cuts wheat export forecast to a five-year low of 18.1mln t due to reduced domestic harvest and lower Chinese requirements.
• Talk of early frosts seen as a potential risk to North American crops
• Ukraine’s grain stocks reported at 23.4mln t as of 1 Sept, up 15% on the year. 
• Egypt’s state buyer GASC purchases 180,000t of French wheat for 11-20 Oct shipment – wins order with competitive price.