Gleadellsmanaging director, David Sheppard comments on the wheat market:
International GrainsCouncil raises 2014/15 global wheat and corn production / stocks corn stocksto a 27-year high.
USDA expected toraise US corn yields in next weeks report stocks seen topping 2bln bushels.
Russian grainsexports forecast to fall in September following record August of 4.1mln t thistakes total tonnage shipped in first two months to 7.26mln t (includes 6.4mln twheat).
Ukraines grainexports jump to 5.01mln t in July-August (2.75mln t wheat / 1.89mln t barley /0.37mln t corn).
Canadian wheatstocks expected to climb to 20-year high.
Egypts state buyer GASCpurchases 120,000t wheat (half Romanian, half French) for Oct 1-10 shipment.
German farmministry puts 2014 wheat crop at 27.9mln t, an increase of 12% on the year.
Russian governmenttalks of buying 5mln t of grain into intervention scheme although no detailsare yet released.
Generallythe markets had been quiet, but weaker, pressured by the potential of record UScorn output and supported by tensions in Ukraine.
However,the rumour that Moscow had agreed a cease-fire with Ukraine was enough to sendall markets down to new contract lows. It was later clarified that presidents Putinand Poroshenko had agreed steps towards a cease-fire.
Alleyes will be on the USDA report due out next week, with the expected increasein US corn yield seen pushing US stocks above 2bn bushels (305 mln t).
EUmarkets have mainly been concentrating on sorting out quality issues. Markets,already pressured by the strong export pace coming out of the Black Sea, saw afew crumbs of comfort with an aggressive offer of French wheat to Egypt. While60,000t was booked, more was offered, reiterating not only the qualityproblem the French have this season, but also a potential storage problem astraders/merchant try to segregate the various qualities to suit thefeed/milling and export homes.
TheUK remains in a stop-start harvest as growers try to get the last percentage ofthe crop. The delays in harvest, coinciding with a return of wetter weather,mean some sort of drying will be needed. Domestic demand still remains far fromrobust, even with LIFFE slumping to a four-year low, as end-users and tradersalike concentrate only on nearby positions.
Insummary, the news of the hoped-for cease-fire between Russia and Ukraine couldbe the final straw to break the markets back. The threat of increased tensionand potential export restrictions had provided some level of support, but withthis threat now somewhat abated, it could signal the next downward pricemovement.
Asmentioned above, the USDA is expected to produce an increasingly bearishcorn/soy report, with wheat playing second fiddle. Egypt may have given Francehope, but this may be short lived unless a shortage of storage forces moreaggressive offers. Finding a bullish argument is hard at present, with only thepotential of Russian intervention, or a return to hostilities in the Ukraine,the most likely.