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

All global markets have felt the backdraft from China’s economic concerns, with traders increasingly nervous over Chinese spending power and import requirements, especially commodities.

Although some support for US values has resulted from a weaker US dollar, wheat exports are still running 24% lower year on year, against a projected 7% increase.

With US spring wheat harvest well ahead of normal, soy and corn crop ratings stable, and weather deemed favourable, the fundamental outlook slant is still bearish as US wheat remains uncompetitive on global markets.

Weather in Australia currently defies the El Nino phenomenon with more showers.

EU markets, which were already reeling from limited demand, increasing crop forecasts and aggressive competitor selling, weakened further on the Chinese crisis.

The French wheat crop is now projected at a record 40mln t plus, and with all three MATIF intake silos now closed for intake the sheer volume of supply is weighing heavy.

Spot markets across much of mainland Europe are offered at well below replacement, in an attempt to buy some interest. Russian, now expected to produce over 102mln t this season, is due to review its export tax position on the 10 September, with the outcome key for EU export prospects.

On the other hand European maize output is revised lower, meaning that more feed wheat demand may surface at some stage.

UK futures have remained unchanged on the week, despite all the financial global turmoil. With the UK weather now making further harvesting a ‘snap and grab’ exercise, quality concerns will rise due to the area still open to the elements.

The likelihood of increased supplies of feed, and the potential need for greater imports of quality wheats, could provide the UK with an even greater export surplus. Prices are under pressure from cheaper alternatives and other exporting regions. Given the general lack of demand, values may have to move lower to compete.

As we have mentioned before, when China gets wobbly so do all markets! There is still little change to the overall bearish fundamentals, and unless we see a major problem in Australia or US corn/soy crops, there is nothing to suggest any sustained rally in wheat.

US wheat is uncompetitive, the Russian wheat crop is growing and reports that the government would like to see exports to Egypt increase would not project a bullish stance on their export tax, unless they specify Egypt as an exception.

Overall, the same scenario persists – too much wheat chasing too little demand!