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

US spring wheat futures have soared to a three-year high, as drought conditions in the northern plains increase the talk of greater crop abandonment and concerns build over the availability worldwide of quality and high protein wheat supplies.

An update on Canadian plantings released yesterday showed a 3.7% reduction in the all-wheat area for this year’s harvest, supporting the current US-led rally.  

Although some signs of support are starting to drift into the Chicago market on spread trading, quality issues in winter wheats and current favourable weather forecasts for US corn and soy crops continue to limit gains in Chicago.

EU prices have fallen €3/t over the week, as a rise to a one-year high for the euro and favourable EU/Black Sea weather outweigh the strength in the US market.

Although weather is currently favourable, the recent heatwave is seen to have caused some damage to the crop, with Strategie Grains lowering its projection for the French soft wheat crop by 1.6mln t from its mid-June report.

UK new crop prices have fallen £2/t on the week, as the Governor of the Bank of England triggered a rise in the value of sterling with a clear-cut suggestion that UK interest rates would need to rise.

Old crop values seem to be easing as the potential of larger-than-expected old crop supplies, more optimism over new crop production and waning consumer demand start to weigh on long-holders.

In summary, although short-term weather forecasts remain favourable, the long-term forecast (which is hard to trust) brings hotter, drier weather back into the US Midwest, which could stress crops during their key development stages.

With the EU harvest beginning, questions remain. What damage has the recent heat caused, and are the current rains helping or hindering final yield potential and quality?