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

With the US wheat market down $9/t on the week (due to a firmer US$ and the unwinding of corn/wheat spread) the MATIF is down €2/t and LIFFE is unchanged. US markets continue to be dominated by the ongoing corn harvest and the likelihood of a record crop, which is weighing on wheat values, especially with US winter wheat plantings proceeding at an average pace (86% complete) and weather/ crop conditions both reported as favourable.

EU values, slightly supported by a weaker currency, have seen only limited movement, as traders still point to hopes of more export interest in EU wheat. Southern hemisphere concerns, Black Sea quality issues and Australian/Canadian logistical problems all have EU traders believing export demand, especially for French wheat, will increase over the next few months. However, given the size of the French crop, export demand is definitely needed.

UK values remain underpinned, mainly driven by spot demand into the north. The recent return of more adverse weather conditions has slowed sowings for the 2014 harvest, and although the planting window is still open, the final wheat area may struggle to reach the 2mln+ hectares being projected by analysts, although this figure remains achievable.

In summary, markets have reached a crossroads in determining price direction. The record US corn harvest will ensure that for the second half of the season there will be more than ample supplies of coarse grains across the globe. Wheat demand (shipments) are running well ahead of forecast from all the major exporters (US/EU/FSU) but, with the onslaught of cheaper corn, this may well dampen importers’ enthusiasm to extend wheat coverage.

Despite earlier concerns Black Sea sowings have picked up the pace over the past 10-14 days and final area losses are likely to be less than first feared. Spot sentiment remains supported but that could be the best reason to sell.

Wheat

• US corn crop ratings have improved. Harvest is now 59% complete with winter wheat plantings 86% complete. Crop condition is 61% good/excellent. 

• US corn prices touch a three-year low as US harvest accelerates, with many reports of better yields.  

• China National Grain and Oils Information Centre estimates corn imports at 5mln t versus the USDA forecast of 7mln t – 3.88mln t is already committed.

• India cuts wheat export floor to $260/t to become more competitive on the global markets.  

• Black Sea wheat exports are forecast to fall as Russian farmers withhold crops; reports of Kazakhstan quality problems.   

• EU wheat prices remain steady on a lack of farmer selling and on hopes of export interest to Egypt. 

• Argentina’s weather remains a key focus although very low wheat crop estimates are now mainly discounted as conditions have improved.  

• Brazil has raised its tariff-free wheat import quota by 600,000t to 3.3mln t following crop losses in Brazil/Argentina.