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

Global

As expected in last week’s report, the USDA trimmed US corn yield, production and ending stocks and projected global stocks down 5mln t. Whilst this initially gave the market some support, the fact global wheat stocks were increased by a similar volume limited any upside potential.

The monthly report continues to show that US farmers seem to have been ‘prevented’ in planting the projected area for most crops, which in turn could result in the USDA trimming its acreage estimates in future releases.

We await clarification of any changes, if any, to the Russian export tax system.

Latest estimates of the Australian wheat crop put the crop up over 25mln t, despite what is reported to be the strongest El Nino since 1997/98.

Monsoon rains in India, which are seen critical to summer grain production, are lower than average and the driest since 2009, when India had its worst drought in 30 years – maybe one to watch?

Europe

Crops are increasing, export demand remains slow and the MATIF stores are still closed for intake. In both France and Germany the lack of export business is becoming a major concern, with the likelihood of increased volumes of milling wheat being sold into domestic feed demand.

Any export demand is predominantly being lost to the Black Sea, and with both crop and export projection being increased for Russia and the Ukraine, EU prices will need to be competitive to compete.

UK

With some 10 to 15% on the wheat crop still to be harvested, and likely to be of feed quality, the market dynamics remain one of more supply than demand.

The pressure exerted by an oversupply of wheat during the harvest period now seems to be prolonging itself into the October position, as delivered values reflect the current oversupply. The erosion of the forward premium is likely to continue, as the UK needs to become more competitive in order to shift any sizable part of its surplus.