EU Wheat Close - Monday
Trade ideas are that sooner or later, and probably the former, Russia will be sold out of wheat for 2012/13 and that Ukraine will also quickly follow.
The notion is not without foundation. Firstly, Russia has already exported 5.3 MMT of grains between July 1 and September 5, out of an implied maximum of 14 MMT. Secondly, at 3.76 MMT Ukraine has already exported 67.8% more grains in the 2012/13 marketing year so far than it had this time a year ago.
The Ukraine Ministry have set an export ceiling of around 20 MMT for total grain exports this year, and 12 MMT of that is likely to be corn.
Thirdly, both are thought to have existing significant commitments already between now and the end of next month.
Finally, Black Sea prices are on the rise. An analysis of last Thursday's tender shows that Egypt paid on average around USD8/tonne more than their last purchase made just a few days previously. When freight is included into the offers made, French wheat was around USD11.50/tonne dearer than Russian wheat for the Oct 21-31 position. Five Russian cargoes were offered for this position, four of which were booked.
However, for the Nov 1-10 delivery period only one cargo of Russian wheat was offered outright (one seller offered only one cargo for each delivery period on a strictly either/or basis), which was subsequently accepted with Glencore named as the seller. It is interesting to note that the price paid for this cargo was over USD7/tonne higher than for shipment just a week or two earlier, narrowing the differential between Russian and French wheat landed in Cairo to less than USD5/tonne.
FranceAgriMer have slightly cut their domestic soft wheat production estimate for 2012 to 36.5 MMT from 36.7 MMT previously, although still 7.5% more than they harvested last year. Oilseed rape production is now seen at 5.4 MMT from 5.3 MMT previously and at up 1.1% marginally higher than last year.
Heat and dryness sees the corn crop rating cut from 73% good/excellent to 69% this past week. Production is seen at 15.25 MMT versus 15.73 MMT a year ago. Concerns about the current conditions are already giving rise to worries over winter rapeseed and wheat plantings for the 2013 harvest.
Much of France has only picked up a maximum of 50% of normal moisture in the past 30 days. Large parts of Spain, Germany and Poland are also dry with similar conditions seen persisting across Slovakia, Hungary, Romania, and Bulgaria.
The trade will likely spend the next couple of days in limbo, awaiting Wednesday's USDA WASDE report. Revised production estimates for this year's US corn and soybean crops will be of particular interest, with wheat likely to be given only a supporting role. US 2012/13 wheat ending stocks are seen rising slightly to 709 million bushels from a forecast last month of 698 million bushels.
On the other hand, world wheat ending stocks for 2012/13 are seen falling from the 177.17 MMT estimated last month to 174.5 MMT this time round.