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

USDA’s world supply and demand report last week did little fundamentally to encourage the bulls, as global wheat production and ending stocks were both raised to record levels.

US exports continue to match the USDA projection, but even if they end up doing so carry-over stocks would increase year-on-year.

Export competition is seen intensifying over the next few months as large Australian, Canadian, and Argentine crops hit the market. US prospects were not helped by this week’s 0.25% rise in US interest rates, which in turned firmed the US dollar.

EU values are trading up €3/t on the week, supported by a weaker euro/US dollar rate spread.

FranceAgriMer reported that the area sown to soft wheat for the 2017 harvest in France was up 0.8% at 5.2mln hectares. It forecast ending stocks rising to 2.7mln t from 2.5mln t previously, mainly due to larger imports and reduced domestic use.

The UK market is unchanged on the week. Sterling continues to strengthen against the euro, but the interest rate rise by the US Fed has seen sterling and the euro slip against the US dollar.

DEFRA yesterday released its final crop estimate for 2016, trimming the UK wheat crop to 14.38mln t, reflecting both a decrease in area of 0.5% and yield of 12% on the year. Although the revised crop is lower than the previous two seasons, it is in line with the five-year average of 14.7mln t.

For global markets, there are some underlying supportive factors; the likelihood of another drop in US winter wheat planted area, the size of the current fund short operating on the Chicago market, the apparent imbalance between quality and feed wheat grades, and weather concerns across parts of the main northern hemisphere growing areas.

However, given the levels of stocks at the end of 2016/17, weather concerns would have to translate into major crop losses to sustain any major crop rally in the new year.