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

Values are unchanged (down then back up) over the week. Prices were affected by weakness in the equity and oil markets plus reports of slowing Chinese growth and commodity demand. The subsequent fall to recent lows provided buyers with cheaper US supplies, allowing markets to recover.

US wheat sales continue solely to routine destinations; current export inspections are running at only 55% of the USDA yearly projection and there are only 20 weeks of the season remaining. On the global markets US wheat remains about $5-10/t above European prices, and the move higher yesterday will do little to improve its competitiveness.

The European market (MATIF) is up €4 on the week, supported by a move to an 11-year low against the US dollar and rising tension in the Black Sea region. French wheat, discounted against replacement to secure volume given that country's ongoing quality issues, again monopolised the latest Egyptian tender.

Although officials raised the French wheat export estimate to non-EU destinations by 300,000t, French and EU end-season stocks are projected to rise sharply, so this still constitutes a bearish end-of-season factor.

News that the Russian government has not ruled out an export ban if the proposed export duty from 1 February does not increase supply and reduce domestic prices seemed to have little impact. Traders have already written off the Black Sea region as a major supplier for the rest of the season.

UK values have firmed £1 over the week, despite sterling’s strengthening against the euro. That will not help exports, which struggled to reach 1mln t to the end of December, although interest remains. Domestic demand is all about the next four to six weeks as end users wait and pray for lower prices, given the potential hike in supply of feed grains both in the UK and EU.

In summary, US wheat became more competitive, and then lost that edge as the market firmed on rising tension within the Black Sea region. Speculators believing trade may be disrupted, but, with Russian export duty to be imposed from 1 February and the Ukrainian government already asking traders to limit exports, one could ask exactly what trade is at risk!

Ample supplies of wheat remain and, as the weeks progress, new crop gets nearer and demand starts to wane. The likelihood is that key exporting regions (US, EU and maybe even the Black Sea) might have to chase demand, and in most cases, this means lower prices.

• Ukraine grain stocks reported at 38.8mln t as of 1 January, including 13mln t of wheat
• Egypt reports enough wheat purchased to last until mid-May – well into domestic harvest
• Iran expected to import just 3mln t of wheat next year (Mar15–Feb16) compared with 9mln t this year
• Egypt purchases 240,000t of French wheat for 19-28 February shipment – sold at discounted price  
• Further Egyptian purchase lifts France’s wheat export hopes but stocks still seen as sharply higher year on year
• Wheat prices rise on speculation that Ukrainian / Russian tension may disrupt trade.
• Ukraine reports winter grain area of 8.97mln ha, up 7% on the year (wheat at 6.8mln ha)
• Russian domestic prices decline due to export curbs set to be imposed on 1 February
• Strategie Grains lifts EU-28 2015/16 soft wheat crop to 140.4mln t – raises 2014/15 exports but stocks projected at about 16mln t
• Russia may consider grain export ban, but not yet