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

Weakness following the USDA report was quickly dismissed as three days of weather-induced fund short-covering saw markets rally. Heavy storms crossing the US plains increased talk of potential quality issues.

In additional, talk of frost in northern states, dryness in Canada and forecasts of heat over the next week in parts of Russia encouraged the funds holding record short positions to cut their exposure.

Winter crop ratings improved on the week, reported at 45% good/excellent, with initial spring ratings pegging the crop 65% in good/excellent conditions. Crop ratings, a firmer US dollar and confirmation that Russia has removed the export tax on wheat, all helped pull wheat off the highs.

EU prices followed the firmer tone before retreating from the highs. Although the EU increased the level of export licences granted last week, the likelihood of increased offers of Black Sea supplies should curtail any further substantial export interest from France or Germany. While the weather continues to remain favourable, and would support trend yields, there still remains a lot of the growing season left.

The UK market gained support from firmer global markets, raising futures off recent lows. However, as futures firmed, delivered prices remained unchanged as buyers become reluctant to push pricing ideas higher. The balance sheet still shows growers holding a large amount of wheat and, with bearish old crop fundamentals still intact, the selling attitude of the grower will remain key in market direction.

In summary, the funds have always been the short in the market, and at one point needed to buy. Recent weather issues have forced their hand. However, with the US showing a 20% year-on-year increase in wheat stocks, the recent rally in US futures has done little to improve the value of US supplies. Quality issues will not be resolved until harvest, but with no shortage of wheat within the EU and FSU, the recent rally has just made uncompetitive US supplies even more expensive.

• USDA reports US corn plantings 85% complete – favourable weather continues to support planting ideas.
• USDA reports US spring wheat plantings all but complete at 94% - initial crop ratings pegs crop at 65% in good/excellent condition.    
• Russia removes tax on wheat exports until 1 July  – uncertainty surrounds the new regime for the 2015/16 crop year but the removal reminds markets that Russia still has some wheat to export.
• Russian agriculture ministry reports Russia has exported 20.3mln t of wheat so far this season as of 13 May.
• Crop bureau France AgriMer raises French soft wheat area estimate to 5.17mln hectares, up 3% on 2014.
• DEFRA reports English/Welsh wheat stockpiles rising 49% in February year-on-year to 6.4mln t – highest since at least 2008.
• USDA reports US winter wheat crop ratings up 1% on the week at 45% good/excellent – improved hard red winter wheat in Kansas.
• US wheat rallies on concerns that rain and frost fears are overshadowing US wheat ratings.  
• Weather forecaster flags signs on looming Russian dryness.