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

Some harvest activity has occurred in the south and east of the UK, although recent rains have stalled progress for the moment.

Traders were expecting an early harvest in these areas, so the reality has created a short-term weather market for those growers fortunate to have old crop supplies left.

However, this weather premium is likely to be short-lived. New crop UK prices have continued to weaken, down £3/t on the week, as falling European markets leave UK export prices uncompetitive.

One reason for that price pressure has been continued liquidation of long positions by funds in the Chicago market. Traders are working to a less threatening two-week weather forecast for the US Midwest, discounting ailing crop ratings and a more threatening mid- to long-term weather outlook, at least for now.

The weak US dollar is also having an effect. Economic uncertainty in the US has led the Federal Reserve to indicate that it could launch plans to reduce slowly its large bond portfolio after the next policy meeting in September. The euro pushed to a two-year high, weakening prices in the EU by a further €5/t on the week.

 Analysts have pegged the French soft wheat harvest at 63% complete, with crop ratings remaining stable. However, rains continue to disrupt the German wheat harvest, and may eventually affect final quality.

Russia’s harvest continues to progress. Although it is running behind last season’s pace, yields are better than expected. Estimates for the 2017 grain crop have been revised higher, with the ministry talking a wheat crop similar to last year’s record level.

The larger global picture hasn’t changed, with quality problems persisting in North America, North East EU, and Australia. However, Black Sea supplies are increasing, and their aggressiveness on export quotations will provide the leader for the EU markets.