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

Negative sentiment still has the markets in its grip, as current weather patterns continue to support US crop potential. The slow pace of new-crop US exports already has analysts believing USDA projections for that market are too optimistic.

Weaker oil and metal markets, reacting to the biggest slide in Chinese shares for eight years and raising concerns about a slowing economy/import demand, did little to support despite a weaker US dollar, as most agricultural markets witnessed a sell-off.

EU markets have followed the US lower as harvest progresses and demand wanes. France’s wheat harvest is reported at 60% complete, although concerns are increasing as the harvest moves into, and north of, the Paris basin. Quality issues in this region could provide more anguish for exporters who, after last year’s problematic harvest, may again be forced to blend to obtain export specification.

One crumb of comfort was a report that Egypt’s state buyer GASC was considering extending the exemption deadline beyond August for French wheat imports with moisture limits up to 13.5%. However, recent tenders still showed French supplies $20-25/t too expensive.

The UK market has transfixed itself into a two-week affair – this week and next week, as market shorts increased their presence as the weather turned for the worst. Spot prices have firmed, but buying and selling activity remains lacklustre beyond the harvest period.

New crop export prospects still remain tough as aggressive Black Sea prices rule the roost. In addition a recent report showing a 0.7% growth in UK GDP for Q2 has pushed sterling back over 1.42 euros.

In summary, it remains tough to be bullish on wheat as there is ample supply and weak demand. Black Sea wheat is still the cheapest and although the weaker markets lowers the value at which ‘tax’ cuts in, Russia should still be in pole position for most tenders.

In the long term, weather, currency and politics will have their say, but with the winter planting season just ahead, current Black Sea interior values, supported by weaker currencies, would not suggest a reduction in the wheat area for 2016 harvest.

•  US wheat quality tour pegs hard red spring wheat yields at 51.1bushels/acre vs 48.3 bushels last year – best first day in 21 years.
• Biggest slide in Chinese shares for eight years sparks concerns of slowing economy/reduced import demand leading to sell-off of agricultural commodities.
• Russian agriculture ministry reports country on track to harvest no less than 100mln t of grain this year.
• India to reinstate wheat import duties after eight years due to high domestic stocks and recent Australian purchases.
• US agri-stats agency NASS reports corn crop ratings up on the week (9% v poor/poor, 21% fair and 70% good/excellent) – down from last year (6%, 19% and 75% respectively).
• NASS reports spring wheat crop ratings up on the week (7% v poor/poor, 22% fair and 71% good/excellent) – marginally below last year (5%, 25% and 70% respectively).
• Canadian Wheat Board pegs that country’s spring wheat yields at 38.9 bushels/acre – lowest for eight years, and below last year’s 45.7 bushels.
• Egypt’s state buyer GASC considers extending exemption deadline on French wheat imports with moisture limits up to 13.5% beyond August.
• EU crop monitoring unit (MARS) cuts estimates of EU soft wheat yield to 5.8t/ha, down 5.5% year on year.