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

New crop weather concerns in the US and Black Sea region have kept markets underpinned.

Continued dryness in parts of southern Russia and the Ukraine is expected to delay winter sowings and there are reports that soil moisture levels are declining in key US winter wheat states. This has allowed the market to bounce off the lows.

With the surprise drop in last week’s forecast for US wheat production, any further weather-related losses will increase fund activity, although US exports continue to run well behind last year and remain heavily priced. Support has also come from a weaker US dollar.

EU futures have moved higher this week, ignoring the supply-demand equation for EU wheat. Egypt again purchased Black Sea wheat in its recent tender and, given the thin French vessel line up, the market will closely monitor the Algerian tender to see at what level it trades.

News that the first-ever Black Sea vessel is currently loading for shipment to Algeria just gives the French market another competitor. One of the MATIF delivery silos re-opened for intake, but given the current French market logistics, it may be very short-lived!

UK futures are mixed this week – down in the nearby position and slightly higher in the deferred. With the harvest all but over, spot delivery premiums continue to be squeezed as growers and merchants look for delivery destinations.

As the apparent harvest pressure eases, it will be of interest to see how the market pans out, and whether delivery premiums return to ‘near-normal’ levels. Although some export trade is ongoing, the UK balance sheet still looks top-heavy, and if the NFU’s comments of a crop size similar to last season are correct, it could get even heavier!

Dryness concerns seems to be ruling the roost at present, although the pace (or lack of it) regarding US and EU exports will need to be addressed. USDA releases its latest supply and demand estimates tomorrow and although we expect several changes to the US balance sheet following last week’s reports, the overwhelming fundamental fact will be the same – too much wheat with little demand, with farmer selling reluctance and technical chart support all adding to a tricky market situation.