David Sheppard, managing director at Gleadell grains offers insight into this week’s developments in the wheat market.

Markets have stabilised this week with improved short-term demand, raising spot premiums. Long-term fundamentals remain bearish, as increased supplies from Argentina and Australia will soon be on the market competing with Black Sea and EU supplies.

However, along with most other commodities, macroeconomics still control the markets with the ongoing Euro-land debt crisis and slowing global economics leaving uncertainty – and uncertainty usually means weaker markets. 

The move by the US Federal Reserve, the ECB and other central banks to lower the cost of existing US$ swap lines to provide liquidity in other currencies helped to support all commodities. But is the motive US$ based or Euro-debt crisis based? This move may work, but some will believe it is a potentially ‘money for nothing’ and, if it fails, could leave governments searching for an alternative fix for the sovereign debt problem and to bankers' reluctance to lend. 

Summary 

• Argentina approves an additional 2.7mln/t of 2010/11 wheat for export, boosting the total to 11.1mln/t.
• Egypt is seen adding Polish and Hungarian wheat to its list of origins in international tenders.
• EU bumper maize crop to cut import needs.
• Ukraine will supply grain, including milling wheat, to Saudi Arabia under an agreement signed this week.
• Russia could harvest around 97mln/t of grain next year.
• Drought/delayed plantings in Eastern Europe may cut 2012 grain crops.
• Ukraine grain exports unlikely to exceed 20mln/t in 2011/12 due to lack of railway transport.
• Rains stoke Australia’s wheat quality fears leading to significant downgrading.