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European wheat futures struck new record highs in volatile trading this week. Markets continued to rise, reacting to further notable purchases from some of the world’s major wheat importers while being mindful of the likelihood of further export restrictions for Russia, the world’s primary wheat exporter. Algeria weighed in with a chunky purchase, thought to be up to 800,000 tonnes, having to pay up to $384/t including freight for shipment mid-December to the end of January. The country relaxed its bug damage specification, now allowing for up to 1% presence, which enables the country to source 250,000 tonnes of this total from Russia. It has the option to source the remainder from a range of origins as wide apart as Poland and Argentina.

The United States Department of Agriculture (USDA) published its November World Agricultural Supply and Demands Estimate (WASDE) report early this week, bringing an end to a short spell of declining prices. A revised estimate for world wheat stocks was released, which was below average trade estimates. The USDA cut world wheat stocks from 277.18 million tonnes to 275.80 million tonnes. This revision changed the negative market sentiment. The profit-taking that was seen from the middle of last week reverted to bullish enthusiasm.Overall, changes for the wheat balance sheet were modest and few but worth noting. The USDA reflected increasing import needs and revised its exports estimate upwards to 203.16 million tonnes from a previous figure of 199.63 million tonnes. The increase in the exports total was aided by an additional one million tonnes exported from Russia, from 35 million tonnes to 36 million tonnes. However, this is in contrast to the figures released by Russian analyst group SovEcon, which has cut its own Russian wheat export estimate to 34 million tonnes to account for the impact of export taxes.SovEcon noted more demand from the EU, increasing its European demand estimate from 35.5 million tonnes to 36.5 million tonnes. This is well ahead of other estimates and leaves an untenable ending stock which is too low to meet domestic demand strategic needs.

Wheat markets have continued to go from strength to strength. Future markets have moved sharply higher, with price gains of over 25% since early September. This rise has been driven by wheat production losses for major exporters Canada, US and Russia and by a loss of French quality amidst strengthening demand.Official EU wheat export data is not fully accounting for all shipments, but private estimates suggest that the EU will have breached 11 million tonnes by the end of October. Ukraine has exported 12.4 million tonnes of wheat in the first four months of the season, which is half the country’s annual quota. Despite prevailing high prices, there is no evidence of slowing international wheat demand.

Wheat futures prices soared again this week, striking new contract highs. This is another record on the back of multi-year highs, driven currently by strong export demand and concerns for tightening world supplies. The Paris wheat market reached its highest level since March 2008 following the release of the EU weekly export data which shows exports have now reached 8.99 million tonnes. Official data for France dating back to July remains incomplete showing just 753,000 tonnes shipped. However, unofficial vessel counts suggest that almost 2.6 million tonnes have been loaded, which would take the total EU shipments to an unsustainable 11 million tonnes.

China is the largest wheat producing country and the United States Department of Agriculture (USDA) estimates the country’s total production this season will reach 136.9 million tonnes. However, Chinese government officials said this week that persistent heavy rain impacting the main wheat producing areas across the country has left planting at only 26% complete so far. This is 27 points below the normal pace. Nevertheless, the State Council of the People’s Republic of China said authorities would work to ensure a bumper harvest next summer. Annual wheat consumption this season is expected to be up to 149 million tonnes which highlights the need for successful harvests. Wheat stocks at the end of this season are expected to fall three million tonnes on the year to a total of 141 million tonnes. This equates to just over half the world total, despite ten million tonnes of it being imported.

The United States Department of Agriculture (USDA) updated markets with the release of its October World Agricultural Supply and Demand Estimates (WASDE) report this week, presenting bullish data that further underpins the strong prevailing prices. Traders expected to see cuts for Canadian wheat output in line with updates from local analysts. Prolonged spells of heat and dryness have been significantly damaging to the Canadian crop and the USDA now sees the crop total down to 21 million tonnes. This is down two million tonnes on last month and 14 million tonnes down on last year. The US wheat production estimate was lowered by 1.4 million tonnes in line with yield adjustments published on 30th September.