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

Factors driving the price of wheat DOWN

• USDA reports record weekly corn plantings, now 71% planted against 95% last year and 79% as five-year average.

• Russia's Grain Union expands 2013 grain crop forecast to 90-100mln t – exports projected at 25mln t

• Canadian AAFC raises 2013 grain and oilseed production estimates – all-wheat production at 29.4mln t

• Australian wheat planting outlook boosted by rain forecast for eastern areas

Factors driving the price of wheat UP

• USDA reports 22% of the US winter wheat crop in good/excellent condition – but this represents a further deterioration of the hard red wheat crop

• USDA reports spring wheat 67% planted against 98% last year and 74% as five-year average  

• China purchases another 360,000t of new crop US corn for 2013/14.

Don’t ever underestimate the US farmers’ ability to plant a crop!  The record weekly plantings reported last week (41.8mln acres) became the catalyst for a sharp decline in US markets, also pressured by improved prospects in the FSU and Australia. The larger Canadian numbers seemed to pass the market by, as new crop markets re-traced to an 11-month low. However, as the week has progressed, markets have bounced off the lows on firmer US domestic usage with signs of improved export demand and Chinese buying.

EU markets followed the US markets lower, and like the US have bounced, mainly supported by weakness in the euro. News that production estimates in Russia are increasing does not bode well for EU exports, but the debate over stock replenishment or exports continues. Wheat crops in Germany and much of France have benefited from the recent favourable weather that has helping plants to catch up on delayed growth caused by the extended winter. However rain is still required in southern Russia.

UK crops, however, remain in poor shape despite more favourable weather in recent weeks. The wheat harvest is likely to be 15-20% lower, with the weather during June and July being crucial in determining how much crops could recover, both in yield and quality.

In summary, it still looks bearish, and the recent bounce could be deemed a selling opportunity for the grower. 2013 global production numbers are massive, and although they may be ‘trimmed’ slightly in future months, they should still be considerably higher than 2012, weather permitting.  Weather over the next few months will be critical, as crops are not yet made, so as to estimating market direction, well, 'that's the name of the game'. 

 Jonathan Lane, Gleadell’s Trading Manager, comments on the OSR market

• The old crop rapeseed market has been a little more active this week as crushers look to book some seed and also due to some farmer selling, albeit in small volumes. The new crop market has seen also seen some ex-farm sales in Europe, though not in huge volumes, while in the UK the market remains very quiet. Both the UK new crop export and delivered markets have weakened in relation to the MATIF futures this week.

• Sterling has weakened slightly against the Euro this week on the back of poor UK retail sales and lower UK inflation. That said, with the £ at €1.1690 the market still remains significantly higher than we saw earlier this year.

• Old crop soybeans continue to rally with new crop weakening. Planting is underway in the US and with corn plantings progressing well, the focus will now shift to beans. In South America the harvest is now almost complete and although we have issues with Argentinian farmer selling and some port strikes, beans are moving to market.