US prices hit a six-week low yesterday as Chicago wheat came under pressure.

A rise in the US dollar and talk of a potential increase in Russian export supplies weighed on the market, even though the perception held by the trade is for increased export demand for US supplies.

The reasoning is if Russian exports continue at a decent pace for longer than expected, there  will be a significantly lower volume for the US to pick up, potentially increasing end-season stocks.

European prices have edged lower on the week, mainly influenced by the fall in Chicago, although a weaker euro/US dollar has buffered the declines. The current pace of Russian exports keeps EU soft wheat exports to non-EU countries under check – these are still reported almost 25% lower year on year, at 5mln t to date.

However, the purchase yesterday by Algeria for December will likely be of French origin. Although Argentine wheat is considerably cheaper, it won’t be available during the shipment period.

But, with Algeria now covered until the new year, the outlook for French wheat exports is looking dim. At current prices it goes nowhere and would be sharply undercut by Argentina’s new crop.

The UK market has weakened considerably over the week, down between £7+/t basis May futures, despite a fall in the pound/dollar exchange. The drop follows this week’s announcement that the Ensus fuel plant on Teesside will cease operations sometime in December, with any potential start-up date unknown.

This has rocked the market, following the recent closure of the Vivergo plant in Hull, this closure re-allocates additional tonnage into the surplus for the 2018-19 season and reduces annual UK total domestic demand significantly.

With talk of a sharp increase in the UK wheat area for the 2019 harvest, this would dramatically alter the balance sheet for the 2019-20 marketing season.

David Sheppard Managing Director, Gleadell comments:

"In summary, the global market hasn’t changed much. The major question remains: How long will Russia continue to export?

"While the answer will have an impact upon final US, and even EU, export numbers, the recent talk-up of Russian exports seems to have sent a shiver through US traders. With still no apparent signs of additional trade business coming into the US export program, further weakness in US prices is likely.

"The UK market has seen a major fundamental shift, with both ethanol plants now closing by the turn of the year. The knock-on effect of additional domestic supplies has driven, and will continue to drive, regional premiums lower, especially in the north of the country.

"Although sterling has weakened and Brexit still provides much uncertainty, it appears that the UK is now trying to price exports into Eire and the near Continent (where importers are unable to handle the size of vessels originating from the Black Sea region) in an attempt to reduce carryover stocks".