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

Over the past two weeks, most of the global weather issues have progressively been eliminated, with improving conditions in the US and FSU supporting better crop prospects. Although crop ratings for US winter wheat have slipped recently, they are still well in advance of last year’s levels.

Expectations that recent storms would severely damage some US wheat crops have been replaced by a realisation that they have provided much-needed moisture after months of drought. Harvest is under way and over the next few weeks better yield assessments will be obtained.

EU markets have felt the pressure of better global prospects, although a widely fluctuating currency has provided much volatility. With the new export tax duty still providing uncertainty in forward export quotes, aggressive offers from Russia for the start of the new marketing season (1 July) has seen the country re-established as the global price-leader, securing the majority of the recent Egyptian tenders.

Recent dryness in parts of the EU has given limited support but latest weather maps places rainfall into some of the deficit areas.

UK markets continue to defy gravity as a rising currency and global weakness leaves supplies very uncompetitive on the export markets. The continued lack of producer selling has provided underlying support to a market where exports remain well behind the expected levels, with inventories set to increase to record levels.

As new crop levels reduce on continued bearish fundamentals, the carry between UK old and new crop in cash wheat terms (not futures) has been eroded, leaving long-holders now storing at a loss, unless they sold the carry when it was there.  

The overall wheat picture remains one of amply supply and, more importantly, limited demand. Crop prospects have improved over the past weeks, although the latest storm pattern moving across the US has again woken up the shorts. Northern hemisphere harvests have started, or are just around the corner. Key importers are projecting increased domestic outturn, limiting their import requirements, and this could provide the market with a number of sellers chasing limited demand.

• The US National Agricultural Statistics Service reports winter wheat crop ratings slightly down on the week (35% fair, 43% good/excellent) – well ahead of this time last year (26% and 30% respectively).
• Argentine government approves further 1mln t of wheat export licences – likely to reduce US HRW interest into Brazil.
• Crop agency SovEcon raises its estimate for Russian 2015/16 wheat crop to 57mln t – USDA currently at 55mln t.
• Ukraine’s 1 June grain stocks rise 49% year-on-year – including 4mln t of wheat.
• Crop bureau FranceAgriMer cuts 2014/15 soft wheat-ending stocks by 600,000t to 3mln t due to record exports – stocks still seen at above-average levels.
• Storm system sweeping across the US raises fears of quality and yields losses to US winter wheat crops.  
• Germany’s main farmer co-operative DRV lowers its 2015/16 wheat crop forecast to 25.8mln t on dryness concerns