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

The US market continues to drift lower, hitting new contract lows. Despite the US Outlook Forum projecting the lowest wheat plantings in 46 years, actual availability is estimated 5% higher year-on-year due to the increase in carry-out stocks this season.

Export sales and inspections are still well behind both last season’s and current USDA projections. With US prices heavily overpriced, future weekly reports will provide further indication of how poor the US export profile is. Winter wheat crop ratings continue to show a marked improvement on last year. This, and the knowledge that US stocks should increase further (next week’s USDA report), suggests support to the US market will be limited to bouts of fund short-covering or an unforeseen weather problem in relationship to spring plantings.

EU markets again have set new contracts lows during the week, as signs of more aggressive Black Sea wheat offers appear.

German/Baltic premiums have firmed after the Saudi tender (870,000t of milling wheat) was sold out of Europe. Despite one cargo of French wheat being offered to Egypt (cheaply) it was rejected (unclear why) in favour of Romanian and Ukrainian supplies.

EU exports continue to run 15% lower year-on-year and, with key importers seemingly well covered ahead of domestic harvests, the export outlook remains bleak, especially for French wheat.

The UK market remains much the same – good spot demand driven by shipper and merchant shorts. A firmer pound has provided downward pressure, pushing LIFFE to contracts lows. Farm prices in the majority of the eastern and southern regions are below £100/t.

In summary, all exchanges (CBOT, MATIF and LIFFE) have hit fresh contract lows as the bearish supply fundamental strengthened its grip. As this season progresses, focus will eventually switch to next season.

Crops generally look in good condition. There are no apparent major weather issues so prospects remain for another decent crop, although at present below last season’s record. It is currently envisaged that the lower crop will be offset by the increase in stock, keeping availability at record levels and pressure on forward prices.