EU Grains Mostly Nervously Higher In Consolidation Trade
08/01/13 -- EU grains closed mixed but mostly higher with Jan 13 London wheat up GBP1.20/tonne to GBP206.40/tonne, May 13 was GBP1.25/tonne to GBP208.00/tonne and new crop Nov 13 was GBP1.00/tonne firmer to GBP183.55/tonne. Jan 13 Paris milling wheat rose EUR4.25/tonne to close at EUR254.75/tonne.
Today was a consolidation day from recent losses, although market remains nervous ahead of Friday night's USDA world supply and demand numbers and unsettled by the large scale fund liquidation in agri-commodities which has been ongoing for several weeks now.
Funds now hold their smallest long position in corn and soybeans for many months, along with a sizable short in Chicago wheat, all in a risk-off move combined with a widespread expectation for a mildly bearish report on Friday.
That leaves the market vulnerable to an upside correction, although few these days underestimate the USDA's capacity to spring a surprise. CBOT corn has staged a limit move in five of the last six years on the day of the January WASDE report.
From a fundamental viewpoint South American weather seems to be improving, albeit too late to help Argentine wheat production, the harvesting of which is more or less complete. Prospects for corn and soybeans do look brighter though in both Brazil and Argentina.
Even US wheat potential is looking up a little. "A slow-moving wave of low pressure may produce over 1 inch of rainfall in Texas and Oklahoma and .50 inch in southern Kansas, relieving drought in hard red winter wheat. This would be enough rain in the southern Great Plains to completely wipe out a October-December moisture deficit," say Martell Crop Projections.
"Today’s forecast is much wetter than yesterday now calling for 0.50-1.25 inch rains in West Texas and 4-6 inches in the eastern part of the state. Five-inch rains are predicted in Arkansas, and 2-3 inches in southern Illinois and much of Indiana," they add.
India's Ministry said that wheat stocks there are more than four times the government's recommended target at 34.4 MMT, explaining whey they have been unusually active in the export market of late. Harvesting of the 2013 crop which expected to be in excess of 90 MMT, around 5 MMT more than domestic consumption, begins in March.
Asian buyers are said to be snubbing Indian wheat offers in favour of South American origin material, even though the latter is a bit more expensive, due to persistent quality issues with Indian wheat. A Bangladeshi deal to barter wheat to Iran in exchange for iron ore, fertiliser and other commodities is also said to be in jeopardy over quality. Bangladesh wheat it would seem isn't even good enough for relatively friendless Iran.
Friday's upcoming USDA report is expected to reveal US winter wheat plantings at a 4-year high of 42.6 million acres, according to a Bloomberg survey. That's around 3% up on plantings for the 2012 harvest and almost 5% up on those for 2011.
UkrAgroConsult say that grain production in Ukraine this year will total 51.85 MMT, an increase of nearly 15% on this season. The Ministry say that 92% of winter grains are in good or satisfactory condition versus only 60% a year ago.