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

After hitting contract lows last week, the US market has bounced over 20c/bushel (about £8/t) on weather concerns, linked mainly to the US plains and North Africa.

Reports of dryness in the plains, and wetter conditions in the Midwest, which are potentially seen as delaying planting of US spring crops, has resulted in bouts of short-covering. However, any rally is struggling against price resistance from the size of US stocks, which provides a significant cushion against perceived lower new crop production.

EU prices are up €2 on the week, but continue to be dogged by prospects of declining demand and rising stocks, with the USDA now reporting end-season stocks in excess of 20mln t.

EU exports continue to run 15% lower year-on-year, which, together with reports that the new head of Egyptian Quarantine is keeping a ‘zero tolerance’ on ergot, is seen as negative to French supplies.

The EU Commission in its initial projection for 2016/17 shows that even with lower production stocks are rising, but it was the words, not the numbers, that grabbed the attention: “Unless new weather events change the crop development progress there is no reason for higher cereal prices – and farmers should be prepared longer term for prices near current levels.”

UK LIFFE prices are up £2.50 on the week, despite a firmer pound. Continued spot demand keeps farm prices underpinned, although the UK has lost its competitiveness in the deferred positions, leaving the likelihood of increased end-season stocks.

Although the global financial markets remain perilous, the recent spike in global stocks and oil has given the commodity markets some risk-off sentiment, lending support.

The USDA report as expected provided few surprises, with global wheat stocks trimmed by just over 1mln t, mainly as a result of lower Australian and Indian production. The US market may try to move higher on talk of weather, with non-US cash wheat trying to buy demand, but overall it’s much the same story – too much wheat chasing too little demand.