David Sheppard, managing director at Gleadells, reveals the latest goings on in the global wheat market

Continued hot weather in the USA has firmed US markets over the past week, although EU prices have not followed on a like for like basis. It appears as if the whole world grain complex is stacked on top of the outcome of this year’s US corn crop and therefore all market participants are watching, with extreme interest, crop ratings and weather forecasts. It looks a bit like a ‘stack of cards market’ – meaning that if the US Corn crop is better than expected, or US wheat yields are understated, the whole market could be undermined. Conversely, if the corn crop is poorer than expected the market would rally again as US traders are very prone to trading their own back yard and forgetting the wider world picture as importers choose cheaper origins.
Meanwhile, the Russians are hoovering up all tenders and US/EU wheat is too expensive to anywhere but very traditional or captive markets.

In the UK, early wheat samples have proved to be of very good quality, with excellent/unprecedented specific weights, whilst yields have been variable but may perhaps be better than expected. Rain has now stopped play as the British Monsoon has arrived with unwelcome timeliness.

Whilst grain markets have their own powerful dynamics, we have also seen macro-economic factors pile uncertainty on uncertainty. The EU, after kicking the Greek problem into the long grass (thanks to their German friends), are now faced with similar issues in Italy and Spain whilst, in the USA, President Obama and his Republican ‘friends’ took it to the wire in raising their debt ceiling. The impact of all this doubt and uncertainty is probably supportive for some commodities versus equities and government bonds. But investors have had their fingers burned by agricultural commodities over the past couple of months and may be rather more cautious this time around – particularly as all the grain fundamentals are not outright bullish.