Jonathan Lane, trading manager at Gleadells, gives the latest insight into the global wheat market, where the release of influential reports has affected wheat.

The USDA report released this week trimmed US wheat stocks, but left corn stocks unchanged which surprised most analysts.

The USDA reported that the potential of an early US corn harvest would increase stocks at the end of the season (end August) – is this fact or just creative accountancy? With US wheat stocks described as 'burdensome' the higher than expected corn number was enough to trigger profit taking, especially with corn and spring wheat plantings ahead of average, and improving US winter wheat crop ratings adding to the negative tone.

EU crop estimates continue to decline with reports that 6-7% of the EU winter wheat area has been lost to the severe winter weather and will be re-seeded with spring crops (barley and corn). The potential of a record US and global corn crop (increased plantings due to winter grain losses) means that, unless there is a major crop problem, corn may lose its leadership in the market place, replaced by soybeans or even wheat, as 2012/13 is looking more friendly.

In the UK, a technical squeeze on the May 12 Liffe wheat contract looks imminent with first tender day two weeks away and a large open position still evident. UK wheat is now more expensive than French wheat which, unless we have run out (not a likely scenario given that we are only in April), is unsustainable.

Summary

• USDA trims US wheat stocks, corn left unchanged - above trade expectations - global stocks also lowered.
• Russian grain export from state reserves seen at 0.5-1.0mln t - quality may limit as from previous year's crops.
• Russia sells 232,261t of grain from intervention during its first two intervention tenders - ministry aims to sell 2mln t.
• Ukraine will export 23.5mln t of grain in the current marketing season - 16mln t already exported.
• Egypt's GASC purchases 115,000t of US SRW for May 21-31 shipment.
• About 4mln ha of crops are suffering from severe drought conditions in China.
• French farm ministry reports 350,000 hectares of winter soft wheat lost to cold-related damage - re-seeded with spring barley/corn.
• French farm office AgriMer cuts forecast of French 2011/12 soft wheat stocks to 2.1mln t - citing an increased export outlook (non EU).
• Strategie Grains cuts EU 2012/13 soft wheat output to 126.8mln t due to severe frost and drought - French and German crops revised lower
• Argentine 2012/13 wheat plantings to fall 15% on year as low global prices lead farmers to turn to alternative winter crops.