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

Just when you are expecting nothing special from the USDA, it throws a curveball! Despite the stock report mainly coming in line with trade estimates (bearish), it was the corn and wheat acreage numbers that drew most attention.

The all-wheat acreage was estimated at 49.5mln acres, down 9% year-on-year, and mainly due to a 14% drop in spring wheat plantings (lowest for 44 years). Corn acreage was estimated at 93.6mln acres, up 6% year-on-year which, if reached, would be the third largest area on record.

While all the hype will be around the lost wheat acreage, even allowing for this the total US wheat availability for next season would be no less than this season, assuming average yields.

Add in a potential record 14.5bln bushel (367mln t) corn crop and total feed grain supplies would look extremely heavy; if the corn/wheat spread widens, additional domestic corn usage could reduce wheat feeding.

EU prices did little when the USDA numbers were released, and are trading €2 down on the week. Despite a decent French vessel line-up, and another good week from Brussels, EU exports are still running 13% behind last year’s pace, with a 30mln t seasonal total likely, against the current 32.5mln t projection from the USDA.

EU soft wheat stocks looking to rise well above 20mln t (over 6mln t in France). Cash wheat remains aggressively offered in a vain attempt to attract additional interest as export demand declines into local domestic harvests.

UK prices are unchanged on the week as good spot demand continues to underpin farm levels. Sterling has been mainly weaker against the euro, but firmed against an apparent ailing US dollar.

Exports are expected to exceed 2mln t by the end of March, so the UK will need to stay competitive over the final three months of the season to reduce the surplus, currently seen at around 3mln t.

In summary, the US numbers came as a shock; it is now about how the trade interprets them.

The lower spring wheat area should support Minneapolis (milling wheat), and could drag Chicago along with it. However, with the shift in US acreage, feed grain supplies have increased by about 10mln t, and that is hardly bullish to Chicago wheat.

The fact the US will produce 2mln less wheat is insignificant in the global supply matrix. However, it is the fact that it is in America where the major short is, and where the major weather issues could be, that could make life interesting and could create good selling opportunities.