EU Wheat Ends Mixed; Heads, Sand Etc As CWB Cuts Global Production 50MMT

EU wheat futures closed narrowly mixed Tuesday with very little fresh fundamental news in the market.

Paris May milling wheat traded down EUR2.25 at EUR139.00/tonne, whilst London November feed wheat traded up GBP0.50 at GBP122.50/tonne.

Syria bought 200,000mt of Russian wheat, to add to last weeks order of 240,000mt of Russian wheat for Egypt.

At least some wheat is being bought on the export market. Even if it is all being mopped up by Russia.

It seems to me that the trade can see no further than the end of it's nose at the moment.

The CWB have just forecast Canadian and US production down by 16 and 15 percent respectively in 2009.

Large as they are, neither of those estimates don't even seem to take into account serious drought conditions in both countries as of yet. And things could be a lot worse than that in my opinion.

The CWB predict global wheat production of 633mmt in 2009, down from 683mmt in 2008. That is a serious loss of wheat. And suppose they are only half right. Is that a ludicrous assumption?

I don't think so. Just imagine wheat output in 2009 100mmt lower than in 2008. We'd have ending stocks of just a few weeks of supply. That is very very very tight indeed. Tighter than a tight thing on it's way to a tight things convention. We are talking TIGHT.

Here's a few figures: US production in 2009 is seen at 57.8mmt down from 68mmt according to the CWB. Canadian all wheat output in 2009 is predicted at 23.9mmt down from 28.6mmt, according to the CWB; EU-27 production is seen down from 150.5mmt to 140.0mt according to Strategie Grains; Russia down from 63mmt to 53.6mmt according to Informa; and Ukraine down from 25.5mmt to 19.1mmt according to UkrAgroConsult.

How much is that? Over forty million tonnes less, and that is without China, which could be down anything from 10mmt to 30mmt, maybe more. And Strat Grains are probably being over-kind to Europe. And none of these figures account for a weather problem. These are all based on lower plantings and a return to trendline yields. The US and Chinese crops are already at risk from failing to meet trendline yields.

That is a lot of wheat to go missing. Whilst global consumption is expected to reamin steady at 652mmt/per annum.

Is it just me here, or is everyone being blinded again? Last year it was how oil was going to $200/barrel plus and the only way was up, this year we are all doom & gloomed and the only way is lower.

I seriously believe that grain/food commodities will move very sharply higher and that they will probably be the first commodities to do so. Exactly when that will be of course is difficult to say. If we are optimistic I'd say in last half 2009, if we are more pessimistic then first half 2010.

Looking a little further ahead than that even, as the credit crunch continues to bite, if prices stay where they are or even fall further then plantings and inputs for the 2010 crop could be even lower.

Throw a crop disaster or two and potentialliy very tight 2009 ending stocks into that mix and we could be in a situation where the 2008 all-time high of £200/tonne wheat looks ludicrously cheap.