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

Markets continue to be driven by US corn and soybean volatility with weather forecasts, fund buying and bouts of profit-taking combining to produce a rollercoaster ride for prices over the week.

US December corn is $1/t lower, having traded in a $15 range due to concerns over the extended dry weather threatening yield potential. While this may be the case for soybeans, corn is much further along the maturity process and this should limit further major downgrades on yields, currently projected around the 154bu/acre mark.

The Pro Farmer crop tour projected a US corn crop of 13.46bln bushels. Although this is 300mln bushels lower than the USDA this would, if correct, leave a US carry out of about 40mln t.

EU markets have moved higher, with MATIF up €3/t reflecting the rise in the Chicago market. Harvest is almost complete in northern Germany and France, with yields bigger than expected and better quality too, despite the hard winter and spring weather conditions.

Export pace from within the EU remains brisk with soft wheat export certificates reported at 3.232mln t as of Aug 22 compared with 1.441mln t a year ago. Black Sea offers remain strong, and at the latest Egyptian tender French wheat had lost some of its competitiveness.

UK prices, like the MATIF, have moved higher, with LIFFE trading £2.50/t up on the week. Harvest progress is still lagging previous years, although quality is good and almost all milling wheat seen to date is usable – a welcome change on a year ago.

The UK is expected to produce the lowest wheat crop for a decade, although reduced import requirements should still produce a small exportable surplus to market. DEFRA today released its cereal stock reports and projects total wheat stocks as of end of June for England / Wales up 21% year-on-year.

In summary it remains a corn story! Markets will react to adverse/favourable weather reports meaning volatility will remain until better assessment of yields can be determined. The US balance sheet can absorb further yield downgrades before price rationing starts, leaving wheat fundamentals, on their own, as bearish.

Wheat

• US advisory service Pro Farmer projects record US corn crop despite immaturity and lower yield indications.

• Ukrainian July 1 – Aug 27 grain exports reported at 3.23mln t, up 16% year-on-year (wheat 1.5mln t, barley 1.15mln t, corn 0.56mln t). 

• Russian wheat harvest reported at 38.6mln t as of Aug 26, compared with 31.3mln t at same time last year – yield of 2.88t/ha vs 2.01t/ha last year. 

• German farmers’ association DVB sees 2013 wheat crop at 23.9mln t, up from 22.38mln t in 2012.

• French wheat harvest complete – quality issues have eased with good proteins in the north – crop estimates between 36.5-38.5mln t.

• Egypt purchases 295,000t for October shipment – Russian/Ukrainian and Romanian origin – prices well below US/French levels.

• US corn, soybean markets rise on dry weather concerns – analysts projecting further yield deterioration.

• Argentina’s Ag Ministry trims 2013 wheat area estimate to 3.9mln hectares – wheat ‘safe for now’ from late winter frosts.  

• China buys 55,000t Australian wheat for December shipment – total purchases now reported at 3.7mln t US, 2.2mln t Australian.