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

USDA did mostly what the trade was expecting in its latest report by lowering the corn yield (although it is still set to produce a record crop) and increasing soybean output.

Buoyed by the apparent strong demand for US commodities, USDA also increased its export projections for corn, soybeans and wheat, although for wheat, the higher export number was offset by lower US feed demand (as per September 1st stock figures).

Exports continue to exceed last season’s pace, up 27% year on year. With quality concerns now being raised in both Canada (early snow and delayed harvesting) and Australia (too much rain), that level may support the USDA’s optimism.

EU wheat in general has been a follower of the Chicago market, with reports of slow domestic and export demand, although cash sellers remain few and far between.

It now appears that Egypt, for the moment, has managed to agree terms that attract more offers, mainly from Russia. This in turn has led to Russian interior prices increasing, aided by a firmer currency riding the recent surge in crude oil prices, leaving interior/export prices at near parity. The question now is do interior prices fall, or does the export price have to rise to secure the grain?

In the UK it is all about currency. The ‘flash crash’ witnessed last Friday has seen sterling fall to a multi-decade low, as concerns over Brexit increase.

Since 23 June sterling has fallen 15% against the euro, and almost 20% against the US dollar. While this is likely to raise the cost of UK imports, it has also provided a cash benefit for the UK farmer, pushing up the value of grain.

Spot demand remains strong, providing improved prices for the grower, although interest in the deferred positions remains slow. DEFRA recently gave its first estimate of the UK 2016 wheat crop. At 14.47mln t, a drop of 12% on the year, this gives the UK a much tighter 2016-17 balance sheet.

That was reflected by the AHDB in its early UK supply and demand forecast, portraying a bullish picture, although some of the numbers could be questionable.

In summary little has changed – the world still has plenty of wheat as reported by USDA, the EU is linked to Russian prices and the movements in crude/ruble, while the UK is all about currency.

With the Brexit ‘fall-out’ now starting to hit home, sterling has been the main loser, and whilst supportive to farm prices, a weaker pound will result in a higher cost of all imports, including fuel and food.