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

Global markets have weakened over the past week, down $5, as forecasts look considerably wetter across the whole of the central US, with particularly heavy rains in the plains. US winter wheat is reported as 76% planted and the recent rains should improve prospects, although soil moisture still remains on the low side. The recent weather rally has done little to improve US export prospects, now reported as being down 19% year on year. There is no change in Argentina, with the trade long on physical wheat, short on export licences.

In the EU, MATIF has matched the decline in the US (in dollar terms) as market dynamics remain the same – more supply than demand. Black Sea new crop prospects have improved with recent rains, although the head of the Russian Grain Union reported that 30% of the winter grain area is currently at risk due to dry weather, compared with 37% a year ago. Russian interior wheat prices have firmed on a weaker ruble, leaving export quotations looking expensive against other origins. French vessel line-up look slightly better, with a couple of Moroccan boats due to load.

UK futures are down £3.50 on the week and currency is slightly firmer against the euro.  Delivery premiums for nearby markets still remain under pressure, although for deferred positions they are slightly better, when they trade. However, UK fundamentals remain unchanged. Some export trade is being concluded although it is far behind the level needed to substantially eat into the surplus. Domestic demand is far from robust, and with uncertainty overhanging human and industrial usage in the coming months, forward price erosion may be required to attract buying interest.

In summary, the market is a bit tedious – it rallies on weather concerns, but eases on recent rains and improved new crop prospects (US/Black Sea regions). Although some key importers have extended coverage in the past week, FOB prices have remained little changed, as cash wheat continues to divorce itself away from the futures markets. Supplies are plentiful and demand is lacklustre – Bangladesh rejected another French cargo on quality grounds, having paid nearly $245 per tonne for 10% protein.