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


Factors frocing the market down

Australia’s research bureau ABARES forecasts the country’s 2015/16 wheat crop at 24.4mln t, up 3% on the year.

Russia’s domestic prices fall due to the stronger rouble, increased farmer selling – government state sales also add pressure.

Russian government reports 2015/16 grain crop may reach 100mln t on improved winter crop condition.

Egypt’s state buyer GASC buys 110,000t of Russian and Ukrainian wheat – inventories already in the country.

Indian wheat quality likely to improve – crop seen at 94mln t, down from 96mln t last season.

Factors neutral to market movement

HGCA survey shows English/Welsh wheat area down 7% as of 1st December at 1.69mln hectares, but likely increase in post-December plantings.

International Grains Council expects smaller 2015/16 global wheat crops but large carry-over stocks should ensure large overall supply.

Factors forcing the market up

Corn sowings may prove victim of Russian/Ukraine fall-out – farmers facing financial problems.

Ukraine sees higher than average winter grain losses after poor autumn weather.


US markets moved higher last week due to persistent cold weather across much of the US, which coincided with the month-end to bring a few shorts to the market.

Monthly crop ratings continue to slide in the plains where drought conditions are intensifying. Crops in the mid-west showed some improvement, despite the cold Arctic blast witnessed over the past few weeks.

US exports remain routine and behind the pace required to reach USDA’s projection, and with the US dollar firming, the outlook still remains negative.

EU prices remain underpinned due to a record export pace, with shippers executing large programmes in France and Germany, and the weaker euro.

The stronger rouble and current exports curbs have lowered domestic prices in Russia, as has the increase in ex-farm sales driven by a need for cash ahead of the spring sowing campaign. In addition, sales from state stocks by the Russian government are expected to add to the price pressure.

UK futures and delivered premiums for feed and quality wheat continue to weaken as further increases in sterling nullify hopes of further export trade. Domestic demand remains mainly hand-to-mouth, with end-users reluctant to extend coverage given the apparent ample supply scenario.

One crumb of comfort came with this week’s news that the HGCA survey pegged English/Welsh wheat plantings (as of 1st December) about 7% lower than the final 2014/15 planted area, at 1.69mln hectares. However, the HGCA noted that late winter/spring sowings may be more significant this season due to their potential contribution to blackgrass control.

That said, the total area and therefore crop is projected considerably lower, although higher carry-in stocks will partially offset this.

It appears that old crop is slowly grinding to a halt - ample supplies are limiting demand and lower prices are not encouraging farmers to sell.

New crop has a bit of a story around it, with weather concerns still evident in the US and parts of the FSU. Although the numbers for 2015/16 would still project ample supplies and a continued bearish trend, in most cases crops are not even planted, leaving the weather scaremongers and speculators ample scope to have their day.

Russian officials meet next week to discuss the current export stance, but as long as the trade feels uncertain about export taxes being prolonged, actual business is unlikely to develop, as the outcome will be a key driver in the future price direction for new crop and, to a point, old crop as well.