David Sheppard, Gleadell’s Managing Director, comments on the wheat market

WHEAT

Factors forcing the market down

• USDA trims 2013/14 US corn stocks but raises global wheat and corn stocks.
• Canadian government orders railways to boost grain shipments to ease logjam.  
• Ukraine’s agriculture ministry raises 2013/14 grain export forecast by 500,000t to 33mln t.
• Russia’s agriculture ministry raises 2013/14 grain export forecast to 22ml;n t, up from 20mln t.
• French soft wheat exports estimate reduced to 18.2mln t, non-EU exports lowered 100,000t. 2013/14 carry-out stocks increased to 3.17mln t.  

Factors forcing the market up

• Ukrainian/Russian political situation.
• US HRW wheat concerns continue over dry conditions in the southern US plains.
• Egypt’s new supplies minister to review its tender specification, although unlikely to change moisture levels in 2013/14.  

Wheat prices have rallied significantly over the past week, despite a neutral to bearish USDA report on Monday. The upturn was driven by a combination of the ongoing Ukraine situation, the much-reported dryness in US hard wheat areas, forecasts of a smaller US soft wheat crop and technical buying.

To date we understand that contract execution in the Ukraine is continuing normally. Both Russia and the Ukraine have more wheat to sell in the old crop campaign and spring plantings are taking place in both countries in ideal conditions. How long this rally lasts is hard to call and all eyes will now be on the upcoming Crimean elections.

For UK farmers this rally has given a selling opportunity at attractive prices, which many have taken advantage of. UK and EU consumers have generally ignored the rally and are only buying to fill orders.

Crop conditions in Europe and the UK are generally good and these better prices are, in our view, not justified by grain market fundamentals. They are, though, very understandable given the political situation in an important grain production region. However, history would indicate that non-fundamental rallies are much more often a sell than a buy.