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Gleadell Market Report: US Markets Continue Decline

20 June 2014

GLOBAL - US markets have mainly continued their recent decline, as a bearish USDA report added to the negative sentiment, writes David Sheppard, Gleadell’s Managing Director.

This was tempered by reports of poor yields in US hard wheat regions – but in reality this is not new news and has been well forecasted.

Projection of higher US wheat stocks (despite a small reduction in 2014 production) and small increases in global wheat / corn stock projections at the end of the 2014/15 season were enough for the funds to continue selling.

Although US CBOT new crop wheat (Dec 14) has now shed over $55/t since the highs witnessed in May, US wheat is still highly priced against other origins, which in turn should limit export sales.

Harvest has started in the southern plains and early results are disappointing. Recent heavy rainfall is now seen potentially adding damage and yield losses to hard red winter (HRW) crops, resulting in some signs of short covering over the past few days has, led mainly by other US grain exchanges.

The EU markets have also weakened, but not to the same extent as the US. New crop MATIF has only declined €2/t (since 5 June) supported by a general lack of farmer selling across much of the EU and in the Black Sea.

Crop prospects remain favourable, and over the past weeks yield expectations have started to climb, with the EU soft wheat crop now expected to produce over 140mln t. Bumper crops from Romania and Bulgaria should keep those countries active in the export markets, and competing with the expected ‘harvest rush’ of grain from the Black Sea.

The move by Egypt’s state buyer GASC to extend the moisture tolerance to 13.5 per cent is supportive to French wheat, although the increased penalties for over 13 per cent may deter exporters.

UK markets are also lower, trading £5/t lower over the two-week period. Like much of the EU, the UK farmer remains absent from the market, waiting for a better day to sell.

The comments made by the Bank of England last week that an interest rate increase could be later this year, sooner than most pundits had in mind, has supported sterling pushing levels over €1.25 and $1.70, which is also deemed negative to UK prices.

EU farmers need a weather or political event to turn markets around, which may happen – or may not. If it doesn’t markets could head lower again.

TheCropSite News Desk

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