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

Another week of lower prices as markets react to favourable weather reports. Despite a slight weekly drop in US spring wheat ratings, favourable weather has allowed the US winter wheat harvest to advance to 75% complete.

Increased talk of high vomitoxin levels in the soft red winter (SRW) wheat crop further highlights the problems for US exports this season, still overpriced against other origins, despite the near $1/bushel drop since 1 July. A forecast of lower Canadian all-wheat production did little to support.

EU prices have fallen, despite the weaker euro. French crop ratings were unchanged, but still above last year, and with the harvest well in advance, pressure is starting to mount given the thin vessel line-up. Another high volume, aggressively priced set of wheat offers ensured GASC purchased Russian wheat at its latest tender, with French wheat still around $25/t too expensive. As the harvest progresses north, French wheat yields remain excellent, although protein levels may be lower in the north (unconfirmed), which could have an impact on exports.

UK prices have also weakened as the strength of the pound, boosted by the likelihood of an early hike in UK interest rates, pressured prices. Despite the recent ‘weather-related’ global rally, UK new crop levels have fallen back to within £5/t of the contract low, and given the current un-competitiveness of UK supplies into the export market, the low again may be tested. Old crop values, while weaker on new crop sentiment, continues to find decent demand, although farmers selling activity on both old and new crop remains slow.

In summary, the pressure exerted by the Black Sea cash market looks set to continue, albeit with the uncertainty of the export tax value. Chicago still remains overpriced, even with the $1/bushel fall, and EU harvest logistics are starting to highlight the lack of demand in the nearby positions. Although most pundits expect potential reductions in next month’s US corn and soy yield, production and stock numbers, there is nothing bullish about US wheat fundamentals, as the market moves lower trying to find some demand.

• Global markets have weakened in the past week on improving weather outlook/harvest logistics and limited import demand.  
• Egypt’s state buyer GASC purchases 175,000t of Russian wheat for September 1-10 shipment – French wheat around $25/t too expensive.
• FranceAgriMer reports 75% of French soft wheat crop in good/excellent condition (72% year on year) - harvest estimated at 38% complete, up from 4% year on year.
• US agri-statistics agency NASS reports corn crop ratings unchanged on the week (9% v poor/poor, 22% fair and 69% good/excellent) – down from last year’s (5%, 19% and 76% respectively).
• NASS reports spring wheat crop ratings down 1% on the week (7% v poor/poor, 23% fair and 70% good/excellent) – marginally above last year (6%, 25% and 70% respectively).
• Market commentator Ag Canada updates Canadian 2015 all-wheat production at 27.1mln t, down from previous estimates of 29mln t.