David Sheppard, Gleadell’s managing director, comments on the wheat market

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=  US agri-statistics agency NASS reports corn crop ratings up on the week (9% v poor/poor, 21% fair and 70% good/excellent) – down from last year (7%, 20% and 73% respectively).

=  NASS reports spring wheat crop ratings down on the week (7% v poor/poor, 23% fair and 70% good/excellent) – marginally below last year (7%, 22% and 71% respectively).

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Another weaker week as all exchanges re-tested seasonal lows. US export inspections remain well below the pace and, with aggressive sellers from other competing origins apparently looking to off-load wheat in the harvest positions, many are looking for a cut in the US export projection in next week’s report.

A firmer US dollar, helped by talk of a rise in the Fed’s interest rate, supported the market, although fundamental weakness still prevails, with US soft red winter values back to a $20/t premium to French and Russian supplies.

EU futures have followed, although in the harvest position cash wheat remains heavily discounted in an attempt to find some buying interest. Despite being offered at a discount to Egypt, French wheat was still some $10/t too expensive. 

With analysts now looking at the potential of a record French crop (in excess of 39mln t) and with export vessel line up thin, the news that Senalia (the main futures tenderable silo) had again stopped delivery added increased harvest pressure. 

News that Russia’s deputy prime minister was calling for proposals on grain export duties had little effect as further details were not available. The export duty is an attempt to discourage exports in the event of a currency slide, but to date this has not worked. The trade awaits with interest to see exactly what clarifications to the duty are being proposed, and how these will affect Russia’s export availability.

The UK market still operates within a spot position as merchants/end-users sort out requirements over the tricky early harvest position. Along with a lack of supplies in certain parts of the country, lorries are also now a precious commodity, leaving a two-tiered market.

Prices in the south and east are under pressure as supplies come forward against limited demand, while prices in the north and west reflect a need to secure supplies. It remains very hard to generate any sensible export interest for UK wheat and prices could turn more negative if growers bring fresh supplies to the market.

All eyes will be on the USDA report next week, especially for its yield projection on corn and whether it starts to address the current uncompetitive status of US wheat. The weak ruble and its affect on Russian export duty won’t be known for several weeks, but at present, the market seems to be getting extremely top-heavy with harvest wheat.

Aggressive sellers, who have to move wheat at harvest, are looking to off-load and this is setting the current market sentiment. Where we go when it all calms down is open to debate, but we still see little bullish argument for wheat on its own merit at present.