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

With markets already trading under the spectre of increasing weather concerns across much of the major producing areas, the release of bullish soy stocks and supportive corn stocks and acreage figures by USDA triggered another round of fund short-covering.

Although numbers for wheat were deemed bearish, it went along for the ride. With the likelihood of constricted soy and corn stocks for 2015/16, increased importance now surrounds the 2015 US crops to deliver  – if they don’t exceed five-year average yields, demand rationing will be required.

EU markets, firmer on the back of the US, continue to trade weather concerns (extreme heat across much of mainland Europe) against currency fluctuations on the Greek default debacle, a story that seems to be changing by the hour.

The downward revision by the EU Commission of 2015 EU production and stocks seemed to have little impact upon the market, but the rise in Chicago did – at least temporarily! Black Sea wheat values seem little changed over the past days, with offers trying to edge higher but buyers unwilling to pay more.

The UK followed the firmer tone, with both old and new crop prices rising. UK supplies still remain uncompetitive on export markets with sterling continuing to appreciate against the ailing euro. With harvest just a few weeks away, and the reality that growers have carried a larger proportion of last year’s wheat crop into this season, storage may become an issue. It will be interesting to see how ex-farm sales develop.

In summary, US numbers were bearish, but only a brave man stands in the way of a stampeding bull! Wheat was pulled higher on firming soy/corn markets, but with US wheat massively overpriced, stocks and acreage increasing and exports far from robust, US wheat remains the most expensive wheat in the world.

At the moment wheat fundamentals, especially for US wheat, remain far from bullish, so the recent rally represents an opportunity for growers to lock into better farm prices.

Summary:

• USDA reports July 1st US wheat stocks above trade estimates – 2015 all-wheat acreage also increased.
• Ukraine’s agriculture ministry reports 2015/16 grain exports could reach 37ml t, up from 34.6mln t in 2014/15.
• Canadian farmers predicted to grow larger area of wheat in 2015 – acreage to rise to 24.1mln acres.
• US National Agricultural Statistics Service (NASS) reports winter wheat crop unchanged on the week (23% very poor/poor, 36% fair and 41% good/excellent) – still ahead of last year (44%, 26% and 30% respectively).
• NASS reports spring wheat crop ratings up on the week (5% very poor/poor, 23% fair and 72% good/excellent) – slightly ahead of last year (5%, 25% and 70% respectively).
• International Grains Council sees world wheat output reaching three-year low on lower European and Indian crops – stocks only seen declining 2mln t year-on-year.
• Russian Grain Union may cut 2015 wheat crop estimate for next season on adverse weather conditions.  
• EU Commission cuts estimate for 2015 EU soft wheat production due to dryness concerns.