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

US markets remain a mixed affair, with corn down $2/t and wheat up $1/t as prices rallied into the Thanksgiving holiday. Continued concerns over Argentine wheat supplies and more minor concerns in Australia, coupled with diminishing supplies being offered from the Black Sea region, have boosted the perceived export outlook for US wheat, providing some fundamental support for US values.

Corn prices, already close to a three-year low, are seen by most as cheap., However, with the US ethanol mandate for 2014 still unclear, domestic demand projections are far from certain.

The EU market continues to be range-bound, supported by the ongoing export program and associated logistics. Wheat demand has been supported by delays in corn harvests from within the EU and beyond, but with increased supplies now coming available, domestic wheat demand may start to decline.

Rains have slowed 2014 winter wheat sowings, although the EU’s crop monitoring unit MARS has reported crops being generally in good condition, despite heavy rain in some regions that has hampered sowing.  

The UK market seems to be already in the pre-festive lull as farmer selling remains limited, although domestic demand is far from robust. A recent brief spell of active end-user buying was mainly due to delayed corn shipments, leaving end-users with plentiful wheat supplies for the rest of 2013.

DEFRA’s first official estimates of UK supply and demand forecast feed wheat consumption 14% lower than 2012/13, as the price premium of wheat to corn, barley and oats make the latter attractive options for feed in some areas.

Milling premiums have perked up recently thanks to some milling demand surfacing in the New Year. However this lift is unlikely to be long lasting given the overall quality and usability of the UK crop and the high level of imports to date.

In summary – this is the conundrum – there are tight nearby supplies, especially of global quality wheat, against the long-term ‘bigger picture’ of ample coarse grains. With the festive break looming, there seems little to alter the current market sentiment, both for the short and long term, even with the USDA report due out on the 10 December.

Wheat

• US corn crop harvest now 95% complete. Winter wheat crop condition 62% good/excellent, down 1% point on the week.  
• Ukraine raises grain export forecast to 32.5mln t, up from 30mln t due to record grain crop.
• French corn harvest now 67% complete. 88% of soft wheat planned area sown  – crops in good shape despite rain.    
• Egypt’s 60,000t purchase of French wheat (December 16-31 shipment) seen as paying more than necessary as Romanian was offered cheaper.
• US market rallies on export prospects and some southern hemisphere crop concerns.
• Institute for Agricultural Market Studies (IKAR) reports Russian grain exports at 13.4mln t (projected program of 15mln t) – wheat exports put at 10.5mln t. 
• Argentina’s Rosario grains exchange predicts 9.1mln t Argentine wheat crop.