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

US markets continue to weaken as lower prices fail to encourage a pick-up in exports, which continue to lag behind the pace required to achieve the current USDA projection. Talk of a hike in interest rates supports a stronger US dollar, leaving export values still heavily overpriced.

Election results in Argentina could result in a more transparent trade, and as exporters are currently long of physical supplies (no licences) any freeing up of trade could further hit the potential of US exports, especially into South American destinations.

In the EU, MATIF prices are unchanged on the week, supported by the continued weakness of the euro. Cash premiums remain firm on France’s further share of the recent Egyptian tender and a second Indonesian vessel in that country’s line-up. French wheat is now cheap on a FOB basis – over 350,000t was offered to Egypt, although only 120,000t was booked, as the other offers lost out on the freight rate.

UK market activity continues to increase, both for domestic and export requirements. Farmers’ reluctance to sell and the oncoming seasonal logistical issues should keep spot cash premiums firm although, as reported by DEFRA this week, the UK balance sheet still looks extremely heavy, with a reported balance – for stock or export - of over 5mln t.  Even though export interest has increased, the heavy supply will continue to weigh on values, especially with sterling worth over €1.42 and the knowledge that growers will eventually have to bring supplies to the market.

Over the next few weeks cash markets should remain supported as seasonal issues provide challenges to all sectors. However, long-term fundamentals remain bearish with global, EU and UK supplies all looking heavy.

Politics has raised its profile, with the scale of exports out of Argentina unclear, and now the Russian-Turkey situation. Russia supplies much of Turkey’s gas and oil supply and most of its wheat imports, although Turkey controls the waterway Russia needs for its Syria operation – one to watch.