The wheat market has been testing four-year lows as traders wrestle with a big world crop with a high proportion of low quality feed wheat. The dynamics have changed, with the E.U. becoming more important on the world market, while currency moves, particularly a fall in the value of the euro against the U.S. dollar, have also made for an altered trading landscape.

“The market is searching for feed wheat demand as recent small orders from E.U. and Black Sea sources are testing the four-year low FOB price,” Rabobank said in its Agri Commodities Monthly report. “E.U. quality concerns are confirmed as Algeria recently bought 400,000 tonnes from Germany and Poland, rather than France. Concerns over the quality of the French crop imply that the MATIF price now reflects a higher proportion of feed-grade quality. Until feed wheat demand is found, FOB prices will continue to erode.”

While global supply is adequate, quality is scarce, providing some support, it said.

“Shifting currency dynamics will complicate trade relationships further, as the U.S. dollar continues to strengthen, the euro weakens, and the ruble is in freefall,” Rabobank said.

The International Grains Council (IGC) also reported the bearish tone, but noted that concerns over Ukraine had faded as its export campaign continued. “World wheat market sentiment remained mostly bearish during September, pressured by a record production outlook and limited demand for this season’s heavy availabilities of low/medium grades,” it said. “Concerns about political turmoil in Ukraine were less to the fore, with recent strong exports from the Black Sea region indicating little adverse impact on trading to date.”

Worries about poor harvest quality in some areas continued to underpin values for premium milling wheat, it said.

“A four-year high in the U.S. dollar index was seen improving export prospects for non-U.S. supplies,” the IGC said. “Overall, the IGC GOI wheat sub-Index was broadly unchanged m/m, remaining at around four-year lows.”

The United Nations Food and Agriculture Organization said in its Crop Prospects and Food Situation report that although international wheat prices decreased further in September, it was at a slower pace than in the previous three months.

“The benchmark U.S. wheat (No.2 Hard Red Winter) averaged $279 per tonne, 11% lower than at the same time last year,” it said. “The decline mainly reflects an anticipated record global crop in 2014 for the second consecutive year.”

Strong export competition coupled with an appreciation of the U.S. dollar also weighed on prices, it said.

“However, concerns about crop quality in some growing areas of the United States and Canada provided support,” it said.

The USDA’s Economic Research Service also highlighted the increased role of the E.U. in world wheat trade this year.

“World trade projected this month for the international trade year 2014-15 (July-June) is up 1.7 million tonnes to 156 million,” it said in its Wheat Outlook report. “Higher record-level wheat supplies this month in the European Union make the region a formidable competitor, despite its higher projected wheat feed use and lower imports. The region’s export expectations are up 2 million tonnes to a 28 million, surpassing the U.S. by 2.5 million tonnes.”

E.U. export commitments are rising fast, as Anna Lockwood, analyst at the U.K.’s Home Grown Cereals Authority, wrote in its Grain Market Daily report on Oct. 17.

“This week has seen a substantial increase (945,000 tonnes) in E.U. soft wheat export commitments, with the 2014-15 season cumulative total now at 8.4 million tonnes. Export commitments for the season so far are already 400,000 tonnes above levels seen at this point last year, when total exports for the season reached a record 30 million tonnes.

“The latest forecast from the E.U. Commission estimates total soft wheat exports in 2014-15 at 25 million tonnes. However, as export commitments so far this season already equate to 34% of the forecast, it is likely that the E.U. Commission will increase its forecast for exports its next report.”

U.S. markets have made attempts to go higher.

“U.S. wheat futures closed higher for the third consecutive week,” U.S. Wheat Associates reported on Oct. 17. “A weaker U.S. dollar and strength in corn markets due to harvest delays supported wheat. Gains were limited by improving winter wheat prospects after weekend rains helped replenish soil moisture.”