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

Feed Wheat

Next week’s USDA report, due out on Tuesday, will be the next major signpost for our markets. There is no shortage of grain in the world, but the funds are still short and weather issues, currency volatility and potential political problems are more important than supply and demand – for the moment.

UK crops generally are reported as being in good condition but UK price levels currently make our wheat uncompetitive for export. Given that we will produce an exportable surplus this coming harvest and the fact that we have a heavy carryover from the current season, something needs to change and the time window for a change is narrowing, although it has not yet closed.

Milling Wheat

The old crop milling wheat market has all-but drawn to a close with premiums falling to around £24-25 over feed wheat, a drop of 50% from the highs of early 2015. 

Reduced UK miller demand has been the main contributor to the decline. In addition, falling milling premiums on the Continent have offered greater competition to domestic prices; March saw over 40,000t imported from Germany alone whilst April saw over 45,000t brought in from Germany and the Baltics.

New crop premiums are currently at similar levels to the old crop, close to the five-year average. With the spread between old and new crop widening, the opportunity is there for growers who can carry their milling wheat over given the £10/t or so carry between July and November.

Higher yielding bread-making wheat varieties (notably Skyfall) and a milling premium that has made up a greater percentage of the overall price of wheat has led to significantly higher milling wheat plantings for 15/16.  Coupled with the potential for high carryover stocks, supplies of Group1s and 2s could be plentiful next season, making current premium levels look attractive.

Despite the expectation of lower wheat production in Germany compared with this season, there is also an expectation for a high carry-over there too.  What’s for sure is that the coming weeks of weather are crucial in determining the quality of milling wheat crops both here in the UK and across Europe.

• The US National Agricultural Statistics Service reports winter wheat crop ratings down on the week (22% very poor/poor, 37% fair and 41% good/excellent) – still ahead of last year (44%, 26% and 30% respectively).
• NASS reports corn crop ratings down on the week (6% very poor/poor, 23% fair and 71% good/excellent) – down 2% good/excellent from last week (5%, 21% and 74% last year).
• US rains have caused signs of distress in corn and soy crops – reports of quality issues/potential disease in some wheat crops.
• Strategie Grains lowers EU-28 soft wheat production estimates by 1mln t to 141.6mln t, citing continued dryness affecting yields.
• EU 2015 wheat yield outlook cut by crop-monitoring unit on dryness – soft wheat yields projected to fall 4.7% year-on-year to 5.85mt/ha.
• Spain’s professional farmers’ organisation ASAJA sees 2015 soft wheat harvest at 5.1mln t, down from 5.7mln t in 2014 – driest May since 1947 weather office reports.