David Sheppard, managing director of Gleadell’s Grain Merchants, gives a run down of this week’s events in the wheat market.

UK wheat exports totalled 275,598mt by the end of August. We estimate that total exports to the end of September could total 500,000mt and maybe 1mln/t by Christmas. According to Defra, this means that we will still have 1.4mln/t to ship Jan/Jun 2012. This is more than achievable, but we expect plenty of competition in the export market, particularly at the quality end of it.

Farmer retention is a factor in the current resilience in prices in the UK, but also in the EU and the US. Drilling is drawing to an end and a fair amount of grain has been moved in the first third of the marketing year. So we expect farm selling, to some extent or other, to re-emerge in the not too distant future.

Rumours about Russia imposing an export tax sooner rather than later have provided some support to markets especially given that no-one, after the last two seasons, can really pretend to know what Mr Putin is going to do next. However, the risk has been downplayed by most pundits and it will probably be logistics, rather than lack of supply, that will be a key issue for the export of Russian and Ukraine grain as winter draws closer.

An enormous EU and Black Sea maize crop is starting to pressurise feed wheat markets within the EU. Storage availability and logistics will be an issue as wheat and barley are still blocking inland and port stores and, in the Black Sea, getting the maize to the market will be the problem.

Summary

Our markets remain very range bound and highly sensitive to currency, stock exchange moves and to the progress, or lack of it, that the EU and IMF are making in attempts to sort out the Euro crisis. The wheat fundamentals are not bullish, and a large Aussie crop is coming to harvest that will not provide much to support a friendlier tone. All the bulls are now pinning their hopes on a solid solution in Europe but perhaps, more importantly, on a major shock regarding corn yields in the November, or more likely in the December, USDA report. This may or may not come to the aid of our markets, but trusting the politicians to ‘fix’ the Euro is a big and risky bet for farmers who are still looking at relatively attractive prices.