David Sheppard, managing director at Gleadell Grain, gives some insight into the week’s developments in the global wheat market.

The release of an aggressive cut in US corn yield to 146.7bu/acre (lowest for 8 years), did little to stem the existing bearish trend in markets, as a drop in domestic use left projected stock levels above trade estimates. Likewise, US wheat stocks were also projected higher than expected and, with global stocks showing little change from last month, supplies remain abundant.

The Eurozone, after reeling last week over the Greek problem, left the Euro plummeting to a month-low against the US$ and could fall further on fears Italy, the Eurozone’s third-largest economy, may seek a bailout to avoid a debt default. Italian borrowing costs topped 7% as investors dumped the country’s bonds after margins calls on the country’s debt were raised. The stronger US$ places additional pressure on US commodities already suppressed by dwindling corn supplies and aggressive global wheat sellers.

Summary:

• Black Sea wheat is expected to ‘flood’ markets all season – Russian domination to be replaced with Ukraine/ Kazakhstan.
• Australian 2011 wheat crop is heading for a second consecutive bumper wheat crop of 26mln/t – USDA.
• Ukrainian farmers have harvested 52mln/t of grain from 94% on the sown area.
• Kazakhstan’s gross grain crop more than doubled this year, hitting a record 29.7mln/t, although 10% will be lost in cleaning/drying.
• French July-September soft wheat exports are reported at 4.4mln/t, down 10% year-on-year.
• Ukraine targets record 2012 crop despite drought – 8mln ha sown to winter grains as of 7 November, unchanged from last year.
• Drought conditions improve in US South, but dryness expands in the Midwest.
• Ukraine could lose 30% of 2012 winter grains as region is hit by drought – poor crops to be reseeded in the spring.