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

In the latest USDA report US 2015/16 wheat end-stocks are higher than expected, the 2016/17 wheat acreage is forecast higher than expected and US wheat crop ratings are above last season.

Add in better than expected yields from a winter wheat harvest that is over 50% complete as of this weekend (although there are some quality concerns), and new contracts lows, and it’s hard to get bullish about US wheat.

The increased area would project 2016/17 end-season wheat stocks towards 1.1bln bushels. With USDA also projecting bearish corn stocks and acreage data, support from an increasingly negative corn market may be waning.

MATIF hits new contract lows following the release of the USDA report, which simply added to the perceived growing supplies in the EU and Black Sea. Quality remains the key factor, supporting higher German and Baltic premiums.

With the final full week of the 2015/16 marketing season complete, EU exports were reported at 33.25mln t, just shy of last season’s record 33.44mln t. Ongoing volume continues to trade into Asia, although it now appears that even on better quality spec wheats, these are being offered, and trading at, below replacement.

A week is a long time in politics! Never has that been more true than during the past week. Out of Europe, the resignation of the PM, potential career ending of Boris and complete meltdown of the Labour party.

The ramifications have started – lower currency, a gloomy economic outlook by the Bank of England and the EU pressing the UK to invoke Article 50 and get the exit process moving. Weeks of uncertainty will now become months, if not years, of negotiations with EU ministers looking to give the UK as little as possible.

In summary, world wheat supply will clearly outpace demand and may receive little support from corn if US weather behaves itself. EU/Black Sea crops are increasing, but so are the quality concerns. The turmoil on financial and currency markets has supported higher UK values (futures) but export quotations, if you can find them, are still uncompetitive against other EU and Black Sea values. Even though we are at contract lows (US/EU) the perceived oversupply and aggressive selling gives the impression that we still haven’t seen the lows of this season.