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

US markets have been mixed during the past week, with corn up $2/t and wheat down $4. USDA’s projection of a record corn crop also produced a stock number below trade estimates, mainly due to increased domestic usage and exports.

This encouraged some short-covering in addition to unwinding of corn/wheat spreads which has supported the market. Wheat values continue to drift lower as crop conditions improve, and the likelihood that the crop will enter dormancy in one of the best conditions for many years (65% good/excellent).

The EU market remained underpinned by export potential and declining export competition. The French finally managed to secure three cargoes in the latest Egyptian tender and, given declining supplies in the Black Sea region and perhaps Romania, it appears that GASC has accepted it may have to pay up to buy volume.

If this remains the case for 2014, a chunk (2-3mln t) of potential French exports may well be pencilled into the French supply and demand estimates. EU exports continue the strong pace seen throughout most of this season and have now reached 10mln t compared with 6.4mln t this time last year. The Indian wheat tender, due out this week, has been put back until Monday next week. Its pricing is of increased importance given the recent Egyptian purchase.   

The UK market has remained almost flat over the week, gaining just £1. The HGCA reported that Britain’s wheat quality had recovered after the poor 2012/13 harvest, with an average Hagberg of 314, a 13-year peak and well above last season’s 237.

The ‘better quality’ UK wheat crop will reduce demand for imports, although the September estimate of 245,222t, which brings the season-to-date figure to 828,959t, will ensure the UK retains its net importer status. The HGCA also reported this week that the UK wheat area is projected to rise 22% for the 2014 harvest to 1.98mln hectares, due to good drilling conditions across the UK during this autumn.

In summary, global crops and stocks confirmed abundant supplies which should limit potential market rallies. The global wheat area is expected to increase for the 2014/15 harvests, and given favourable weather should produce another bumper crop, although any signs of crop/weather issues will quickly find support.

EU prices seem well supported, especially after the recent Egyptian tender and export pace, although India on Monday could set a new benchmark. The UK will play follow the leader but with signs of waning demand for US wheat, this could be driven from across the water (France) rather than the pond (US).

Wheat

• US corn crop harvest now 84% complete. Winter wheat plantings 95% complete with crop condition 65% good/excellent.
• USDA forecasts record global 2014 corn and wheat crops. Stocks also increased although US numbers are lower than expected.
• HGCA projects UK wheat area to rise 22% for 2014 harvest to 1.98mln hectares; lower spring barley area (down 40%).
• Strategie Grains sees EU-28 wheat area up 4% in 2014, a 4-year. Trends suggest yields could reach 140mln t – highest since 2008.  
• Egypt’s General Authority for Supply Commodities (GASC) purchases 240,000mt wheat (25% Romanian/75% French) for first-half December shipment. 
• US market climbs from the lowest level in eight weeks on export demand to Brazil/Egypt.
• Ukrainian winter crop plantings end – winter wheat area about 6.3mln hectares (94% of the intended area).
• Strategie Grains trims EU-28 2013/14 soft wheat production estimate by 300,000t to 134.9mln t.