David Sheppard, Gleadell’s Managing Director, comments on the global grain market.

After testing recent lows, markets again have bounced as supportive quality issues have surfaced. Sprouting in US soft red winter wheat, frost damage in Brazilian wheat and various crop/export numbers coming out of Russia have all combined to edge futures higher.

The latest Egyptian tender saw the tonnage shared between Romania and the Ukraine, with little French and no US wheat offered. Funds hold large short positions meaning any adverse news will encourage bouts of short-covering.

European harvest continues to rumble on with around 25% of the French wheat now cut. As reported last week early results were far from promising, but quality has recovered as harvest progress moves into the bay area. Quality will remain key as harvest moves into the key Paris basin and northern France.

Early reports from southern Germany reported specific weight issues, but again the general overall quality should improve. Romania has sold 480,000t of wheat to Egypt, though many are concerned that rains during July may cause problems in obtaining the specification.

In the UK the old crop market has collapsed with the apparent surplus from last season’s crop now coming forward. Spot demand remains limited and the current oversupply has virtually diminished any price premium. The recent warm spell has brought crops forward and the UK waits for early signs of harvest activity to obtain better assessment of yield and quality – this will remain the major driver on price direction within the UK

In summary markets are caught between the supportive quality issues and the likelihood of pressure on futures markets from lower maize prices. Wheat has been a follower of corn over the past months, and will eventually sink or swim on its own fundamental strengths or weaknesses.

Wheat

• Kazakhstan grain exports seen at 7-8mln t this season if grain crop weighs in at no less than 15mln t.
• Ukrainian 2013 grain crop forecast increased to 53.7mln t – wheat at 20.7mln t and maize at 23.6mln t.
• EU Commission raises 2013 common wheat production to 131.7mln t – still below most estimates. 
• Sprouting is hurting quality of US soft red winter wheat.   
• Egypt purchases 240,000t of wheat for 11-20 Sept shipment – purchases during July (for Aug/Sep shipment) reach 960,000t.
• Russia’s Ag Ministry cuts 2013 grain crop forecast to 90-94mln t from previous estimate of 95mln t. 
• Brazil faces prolonged regional wheat shortages after frost damage and is now likely to purchase US wheat.