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

US prices set new contract lows this week as a stronger US dollar and reports of increased export supplies from competitors such as Canada, Russia and the Ukraine weighed on prices.

Canada is projected to produce 30.5mln t during 2016-17, only the second time in the past 25 years that output has exceeded 30mln t. Russian yield and export estimates continue to increase and Ukraine is also projecting higher exports. The world at present does not seem short of wheat.

Corn prices have also eased, although reports of the recent Pro Farmer Midwest Crop Tour predicting lower yields than the recent USDA forecast, which has backed up the general assumption by some of the trade that USDA has over-egged its yield projection, has limited losses.

EU prices are down about €3-4 on the week, although prices edged higher last night. Reports of quality concerns are increasing in Germany and have moved as far east as Russia, where yields and quality have suffered due to rain.

Give these various quality problems, milling premiums across much of the EU have firmed (though not in the UK). News that Bulgarian grain imported to Dunkirk was going to be blended for re-export, rather than being delivered against the MATIF, buoyed the market. With a shipment from Romania not expected until the end of next week, little grain will be stored in silos in time for MATIF execution.

The UK market is down £5 on the week, as a slightly firmer pound and global market weakness eroded competitiveness. Harvest is slowly moving north and west, where regional supply shortages are supporting spot premiums. The rise in EU milling premiums will limit the level of imports witnessed over recent seasons, tightening the balance sheet. However, ex-farm sales remain slow as growers wait to confirm yield and quality. Over the past week there have been encouraging signs of increased activity from end-users due to the recent easing in the market.

In summary, while the supply of coarse grains remains abundant, it is the quality end of the spectrum where a potential shortfall lies.