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

The recent USDA report did little to shake off the bearish sentiment overhanging the market. Although US numbers were left unchanged, a 2.5mln t increase in global stocks, to a new record level of 230mln t, sets the tone for the second half of the marketing season.

US exports still remain off the pace, down 15% year-on-year. Given the likelihood of increased export competition from Argentina, Australia and now Canada, this implies that the US export projection will have to come down, thus raising stocks towards the 1bln bushels mark.

The financial stimulus announced by the ECB provoked a rebound in the euro. The net result in grain terms has been a steady weakening of the MATIF to compensate.

Although Brussels granted a record high level of export licenses last week, the cumulative seasonal figure still represents a 20% decline year-on-year. Earlier euro weakness and cheaper freight has provided a pick-up in the French vessel line-up, allowing the MATIF intake silos to reopen for grain deliveries.

However, with new crop Black Sea prospects seen to be improving and Russian wheat prices becoming cheaper, export competition will remain fierce. This resulted in the French farm office leaving non-EU exports unchanged, and French soft wheat ending stocks at 5.2mln t, up from 2.5mln t last season.

In the UK, seasonal logistical problems are supporting spot levels, although the deferred markets are weaker despite the fall in sterling following the actions of the ECB. In general, UK domestic demand remains lacklustre, with buyers only appearing when needing to extend coverage.
 
In summary, increased global availability and improving new crop prospects keeps the bearish sentiment intact. Despite US and EU export programs running behind schedule, both will face increasing export competition over the next few months.

A general grower reluctance to sell and the US fund short are the only real factors holding up the market as weather concerns wane. As we enter the season of goodwill, and a time for sharing, it may be that we need a few wise men bearing gifts to resuscitate a market that is looking increasingly oversupplied!