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

US markets remain mixed over the past week, with corn down $5/t and wheat up $2. Weakness in the corn market has been heightened by concerns that the US government might soon reduce its requirement of corn-based ethanol blended into fuel for 2014. Although official numbers have not been released by the Environmental Protection Agency, a leaked report projected a corn ethanol mandate of 12.7-13.2bn gallons, down from the previous 2014 mandate of 14.4bn.

US wheat sowings are virtually complete. Crop ratings are 2% down on the week but show the crop will enter dormancy in good shape. Market support has been mainly due to an overall slightly friendly export outlook and private sales to Egypt.

The EU market seems very much range bound with the current export outlook underpinning values. Continued support from last week’s Egyptian tender has waned slightly as a surprise 120,000t of Russian wheat secured the latest tender, with comments made that French wheat prices were ‘too high’.

The EU’s current export pace/program should keep prices underpinned, although in the long-term there remains no shortage of wheat and even larger supplies of coarse grains.  Without a major new-crop problem this could pressure prices in the last quarter of the season.

The UK market continues to follow the wider global markets, although recent comments from the Bank of England/UK government over the UK economy has firmed the pound, lowering prices by £1/t. Domestic demand remains a ‘price when required’ affair with little enthusiasm to extend coverage into the new year, especially with other competing feed ingredients attractively offered.

In summary export pace and logistical issues will support the short term, abundant supplies and reduced new crop concerns may well pressure markets in the medium/long term.

Wheat

• US corn crop harvest now 91% complete, winter wheat planting finished – crop condition rated 63% good/excellent.  
• Ukrainian Prime Minister puts 2013 grain harvest at a record 61mln t.  
• UkrAgroConsult says Ukrainian winter grain area down 4% at 7.73mln ha (wheat 350,000 ha lower at 6.3mln ha, down 5%).
• Russia hopes to keep 2014 grain crop steady year-on-year, despite decrease in area sown.   
• Egypt’s General Authority for Supply Commodities (GASC) purchases 120,00t of Russian wheat for December shipment, saying French wheat prices are ‘too high’.
• India’s State Trading Corporation gets highest bid of $286/t in wheat export tender, well above government’s new floor price of $260/t
• Australian wheat crop hit by frost and rain, potentially leading to quality problems and yield loss.
• Morocco to freeze import duty on soft wheat from 1 January to 30 April to safeguard domestic supplies.