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

Despite the ongoing uncertainties over South American corn and soy crops, Chicago managed to give up over half the previous week’s gains, with May16 wheat and corn down $11/t and $6/t respectively.

It is true that while soy and corn have a story, wheat on its own has no fundamental strength, needing either spill-over support from corn and soy, or from fund-led buying interest. Export inspections and new crop export sales remain sluggish, and winter wheat crop ratings have improved, leaving the potential for good yields and abundant US supplies

EU prices have followed the US market lower, with the May MATIF down €4/t on the week, trading just above the recent contract low.

Despite another good week, soft wheat exports continue to run 10% behind last season’s pace, with the end-of-season figure projected to reach 29mln t, compared with 31.3mln t last season.

French vessel line-up remains strong, with new sales reported to Asia and Mexico keeping cash premiums firm. MARS, the EU crop monitoring unit, raised its yield prediction for the 2016/17 EU wheat crop from 5.96t/ha to 6.11t/ha., a fall of only 2.7% on the year.

With recent local crop estimates also increasing for both Russia and the Ukraine, it has become more likely that the recent improvement in weather could allow 2016/17 harvests to get near the levels witnessed this season.

UK May LIFFE has also eased, down £3/t on the week, as weaker global markets and a firmer currency weigh on values. Delivered premiums have edged up slightly on continued merchant/consumption interest, although there are signs that export demand is starting to wane.

In summary, prices will remain volatile as current South American crop issues, US plantings/crop progress, fund activity and weather all leave markets up in the air.

The recent rally has all been about corn and soy, dragging wheat along for the ride. However, wheat fundamentals have, if anything, become even more bearish over the week as improving conditions push up production estimates. The US will continue to trade its own agenda, but the EU and Black Sea will continue to trade local domestic supply issues, which over the past week have got more burdensome.