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

Further rain across much of the US has kept prices in check. Although traders had expected US crop ratings to improve, they were reported constant on the week – a slight deterioration of the hard red winter crop was offset by an improved soft red winter crop.

A move back below $5/bushel provided an opportunity for funds to start trimming their record short position, providing the only support to a market that eventually traded up $3/t over the week.

Corn plantings were reported at 9% complete, a rise of 6% points on the week and above the 6% recorded a year earlier. Although some states are moving towards the end of the optimal planting window, talk of a mass switch to soybeans is premature, as current weather conditions are seen as ideal once the crop gets planted.

EU prices are trading down €2/t on the week, although a stronger euro / US$ exchange translates to unchanged in US$ terms. A better export week saw 741,000t of soft wheat export licences granted, bringing the season-to-date total to 26.4mln t, against 24.3mln t a year earlier.

But, with French vessel line-up down on the week and weather conditions remaining positive, the market is starting to scratch around for direction. This was further hindered by the Russian government declaring that no early decision would be made on the status of the export tax, although most trade bodies in Russia (including the agriculture minister) would like to see the tax removed as soon as possible.

The UK market continued to weaken with prices down £5/t on the week. Futures are back to contract lows not witnessed since last September, when sterling was cruising at $1.62 and the US$ value was $185 ($15 above current values with sterling at $1.50).

Market dynamics remain the same  – spot buyers, lack of farm selling – and all that has changed is that buyers are now concentrating on May, not April. Seasonal patterns now project lower cereal demand at a time when a firming currency and growing inventories will apply more downside pressure on prices.

In summary, new crop international trade will struggle until a firm decision is made on the export tax. Russian intervention should be the theoretical floor to FOB prices, but crop conditions are improving by the day, and most exporters are showing a year-on-year increase in stock (especially within the Black Sea region).

The likelihood of the tax being removed is likely to bring a flood of grain offers onto the market. With buyers reluctant to extend cover due to the uncertainty overhanging the export tax, any import interest may be met by some-one just looking to off-load, not a great recipe for prices. It is important to remember that Russia exported almost 7mln t of wheat last July-August, and could well do so again.

• Russia’s agriculture minister proposes cancelling export duty on 1 July, the start of the 2015/16 crop year.
• Ukraine grain exports reported at 27.7mln t as of 17 April (includes 9.8mln t wheat, 13.4mln t corn and 4.3mln t barley).
• Ukraine’s winter grains reported as 87% in good to satisfactory condition.
• UkrAgroConsult sees Ukraine’s 2015/16 wheat exports to be little changed from this season at 10.8mln t.
• Spain’s wheat imports to fall 19% year-on-year, with soft wheat harvest seen rising 11% to 6.19mln t.
• USDA reports US winter wheat crop ratings unchanged on the week at 42% good/excellent, 19% poor/very poor.
• Buenos Aires Grain exchange forecasts Argentine wheat area at 4.1m ha, against 4.4m in 2014-15 due to low profitability and financing problems.
• Slow US corn plantings spur talk of farmers changing to soybeans/sorghum that are less expensive to grow.