Grain prices are firming on concerns over poor weather affecting wheat planting in the Black Sea region and strong EU export trade. Due to the government shutdown in the US, almost no harvest data is available.

David Sheppard, Gleadell’s Managing Director, comments:

Markets have moved higher over the past week, as concerns remain over delays in winter planting throughout the Black Sea region. Official reports from Russia and the Ukraine forecast the winter grain area will be well below target levels due to heavy rain in the area, although the current dry spell has allowed a marked increase in sowing activity. Winter wheat area is likely to be lower than initially estimated, although any reduction would be replaced by higher yielding corn.

The current US government ‘shut-down’ over the budget debate has resulted in the suspension of key US information data, leading nervous short-holders to cut their exposure risk. This has also caused the postponement of this week’s much awaited World Agricultural Supply and Demand Estimates report, where USDA was expected to adjust area/yield projections.

EU prices have again firmed, climbing €7/t on the week. The strong pace of EU exports is underpinning the markets, especially with increased talk of Russia and the Ukraine exiting the export trade in order to increase stocks due to the lower 2014 crop prospects. EU exports are running 3mln t ahead of last year, although non-EU French exports are only slightly ahead, due mainly to sales to Algeria. The French farm minister also this week lowered his country’s soft wheat crop estimate to 36.9mln t from 37.0mln t.

UK prices, supported by a weaker currency, have also firmed, up £4/t on the week (May 14 futures).  Spot premiums have continued to rise on a general lack of physical grain, although selling activity seems to have increased on the back of firmer prices. The open interest on the Nov 13 futures remains high at 3679 lots, leading to a potential ‘technical squeeze’.

With the US closed, and no agricultural data being released, traders are running blind over harvest progress of key corn and soybean harvests. Reports of better yields keeps corn on the defensive, although a tightening ‘quality balance sheet’ and new crop planting concerns keeps the wheat markets underpinned. Until the US gets up and running expect markets to remain supportive, as nervous market shorts look to cut their exposure.

Wheat

• US reports better than expected yield from corn harvest – price remains pressured on likelihood of record crop. 
• Coceral sees EU 2013 soft wheat crop at 135.2mln t, up 4.5mln t from previous forecast – corn production cut to 65.39mln t.
• StatsCan confirms projection of record Canadian all-wheat production at 33.03mln t, up from 27.06mln t in 2012.
• Russia’s agriculture ministry forecasts area sown to winter grains at 13mln hectares, missing official forecast by 19%,
• US government shutdown prompts investors ‘to cut agricultural commodities exposure’.
• Ukraine’s agriculture ministry reports 2014 wheat crop could drop by a third to 15mln t due to heavy rains disrupting sowing.