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

Global commodities have continued to weaken due to concern over China’s growth prospects. Wheat is no exception, moving lower in an attempt to find demand, though the reaction from buyers at present is simply to reduce the price they are willing to pay.

Aggressive offers of wheat onto export markets from the Black Sea, the Baltic states and the EU are keeping export prices well below replacement and futures values in a vain attempt to get sales on the books. The overall picture, especially for wheat, remains the same – too much supply chasing too little demand.

EU markets have followed the general global weakness as a thin export line-up and increased supplies continue to drive cash prices lower. With the French crop now pegged at 40mln t plus, and latest estimates from Russia indicating improving crop production, there is certainly no shortage of grain.

The Russian government is due to meet to discuss and finalise the export tax position, which hopefully will be more transparent and easier to trade, especially with the ruble hitting new lows.

The UK market continues to weaken as harvest progresses and yields are reported as better than anticipated. With 40-50% of the wheat crop cut (mainly in the south and east) good yields should ensure that the UK final wheat yield should approach last season's record, producing a crop of circa 15.5–16 mln t, despite a trimming of the wheat area in the recently released DEFRA June survey.

While early-cut test samples produced decent quality, more recently harvested samples indicated a slight decline in quality, with lower Hagbergs the biggest potential problem. As the weather turned, harvest activity in the north and west has been delayed, prompting some short covering. How quickly harvest resumes will dictate whether or not the UK ends up with a south-east/north-west divide on final yields and quality.

Export prospects still remain bleak, due to the very aggressive offers described above. With sterling providing little assistance and growers in general still absent from the market, the realisation of a heavily oversupplied market probably means we are yet to witness the bottom of that market.