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

US markets are down 19c/bushel over the week ($7/tonne) although they have bounced mildly in recent sessions as the market moved into oversold territory. A weaker US$ was also supportive, although prospects for US wheat markets still look gloomy. US exports, running 12% down year-on-year, left the USDA no choice but to lower its projection by 25mln bushels, to the lowest seasonal figure since 1971/2. With the US still heavily overpriced, and export competition extremely fierce, don’t be surprised to see further cuts to this figure, sending US ending stocks higher.

EU MATIF prices are down €4 on the week, although the firmer exchange rate means no change in US$ terms. A sizeable shipment program in Rouen has allowed spot cash premiums to firm, but forward positions remained pressured by the Tunisian sale, sold well below replacement value.

UK prices, also lower during the week (down £2.80/t) are being mildly supported by a weaker currency and good spot demand, especially from shippers. Although delivered prices have fallen, cash premiums have risen as a supply squeeze forces buyers’ hands in covering both domestic and export requirements. However, like the EU markets, the need to keep the UK competitive in the face of increased competition will keep forward prices on the defensive.

Since the turn of the year, UK futures have fallen almost £15/t, and the rise in the MATIF yesterday stopped a run of 10 successive down days. However, the fundamentals remain intact – too much supply chasing too little demand. With waning export interest and no apparent weather problem relating to new crop, it may take a major political, economic or currency-related event to turn the market around.