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

After a period of consolidation, mainly linked to weather concerns, the US market received an extra boost from yesterday’s USDA report, which forecast the lowest level of winter wheat sowings since 1909.

The figure, at 32.383mln acres, is 10% down year-on-year, and more importantly to the market, almost 2mln acres less than trade estimates.

The fact that USDA raised both US and global stocks was ignored. The market moved higher, sparking buying from fund traders as it broke through key technical barriers.

The $12/t rise in US wheat since the pre-Christmas low will do little to encourage buyers to the US. With signs that both US export sales and shipments are slowing, further upwards revisions in US closing stocks can’t be discounted.

EU prices over the week are unchanged as a stronger euro/US$ exchange offset a firmer global market. French farm office FranceAgriMer this week lowered its estimates for that country’s ending-stocks, citing an increase in non-EU export for the rationale, albeit to a level much reduced from last season.

In addition, this week’s export shipment report from Brussels showed, for the first time this season, that 2016-17 shipments are falling behind last season’s pace, reflecting the slow-down in demand for EU supplies.

Recent concerns over new crop prospects in both Russia and the Ukraine have eased somewhat, as over the weekend, the area was blanketed with snow, which should provide a level of protection against the current cold weather blast.

In the UK, the LIFFE contract continues to defy gravity, moving up £5/t over the past week. While a fall in the value of sterling, from €1.172 to €1.144, supports most of the rise, the UK seems to be more and more trading a domestic supply and demand, which as previously reported is projected at the tightest for several seasons.

Good consumer and short demand is still apparent (still mostly confined to the nearby positions), which is supporting farm gate prices. However, the UK remains uncompetitive for additional exports, and the £15-£20/t drop from old to new crop should mean minimum stocks are carried into the new marketing season.

In summary, anything within the USDA report that was deemed ‘bullish’ relates to the US, and the fact this is where the main wheat short is (Chicago fund managers) will provide some short-term support, as the US trades its own back yard.

However, the report showed little change in already more than adequate global stocks, and with recent snowfall in the Black Sea region, and rain/snow expected to enter the US plains over the next few days, new crop weather concerns have eased.