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

US markets continue to fall under pressure from routine wheat sales/export inspections and growing concerns over corn exports to China. With the US concentrating on shipping its huge stockpiles of corn and soybeans, wheat exports have been placed on the back burner leading many to question whether seasonal sales will match the current US projection.

Reports claim that China has now rejected 10 cargoes (600,000t) of corn, leaving US shippers scrambling to switch on-sea shipments at a financial loss, again leaving a question mark over the long-term shipping programme to China and the recently inflated export projection.

The EU cash market, although not successful in the recent Egyptian tender, remains firm in the spot position based on the strong current export pace. French prices had a hefty $10/t premium built into their latest Egypt price, and this time Egypt refused to pay the premium.

Trade consensus suggests France has an exportable surplus of 13.3mln t of wheat this season (a rise of 40% year-on-year) and the fact that Egypt paid an inflated price over its previous purchase in a market (CBOT) that had declined $15/t illustrates the current cash market squeeze.

The UK market remains a follower of other markets but has only lost £1/t over the week. Reported imports for October were higher than expected at 221,190t, bringing the season-to-date total to just over 1.05mln t.

In summary, the spot cash markets are, for the moment, behaving differently from the bearish fundamental futures markets. It’s all currently down to who wants the wheat, and from where can one source it. With the festive period now upon us, farmers have shut–up shop, transport remains a pivotal problem and supplies will be hard to source until January.

When trade gets up and running and the apparent spot tightness loses its grip the overall bearish fundamentals may paint a different picture for markets. We need a weather problem to spark a rally in prices. 

Wheat

• US senators have introduced a bipartisan bill to eliminate the corn ethanol mandate.
• China rejects more US corn cargoes for GMO contamination – rejections now reported at 600,000t – seller trying to switch shipments to South Korea.  
• Low-grade Canadian milling wheat is seen as a threat for soft wheat exporters and a potential alternative supply for cross-border trade into the US. 
• Russia’s Ag ministry sets 2014 production target for total grains at 95mln t – wheat at 55mln t.
• UK imports dipped in October, but were higher than expected – millers report some customers have taken a liking to imported supplies and will continue to use more than in past seasons. 
• Egypt’s grain authority GASC purchases 120,000t Romanian/Russian wheat for January 20-31 shipment, paying  $7/t more than last tender despite CBOT falling $8/t over the week.