EU Wheat Mixed, US Corn Weighs

16/01/13 -- EU grains closed mixed with Jan 13 London wheat down GBP0.55/tonne to GBP214.45/tonne, May 13 up GBP0.50/tonne at GBP215.50/tonne and new crop Nov 13 was GBP1.40/tonne firmer to GBP188.15/tonne. Front month Mar 13 Paris milling wheat fell EUR2.00/tonne to close at EUR250.50/tonne.

London wheat corrected yesterday's strange close which saw soon to expire front month Jan 13 close GBP5.00/tonne firmer at GBP215.00/tonne, whilst May 13 only rose GBP2.50/tonne to also end at GBP215.00/tonne.

Prices closed off the day's highs as US corn fell late in the day, dragging wheat down with it. The reason for corn's demise was news that US ethanol production slumped sharply last week, to the lowest levels since the US Energy Dept began issuing weekly data in mid-2010 in fact.

At home, customs data released yesterday shows that the UK has imported more than a million tonnes of wheat in the first 5 months of the marketing year, suggesting that Defra's estimate of full season imports of 2 MMT may be on the low side.

Exports meanwhile stood at 477 TMT as at the end of November, compared to what Defra call a "surplus available for either export or free stock" of only 750 TMT for the entire season.

OSR exports were up 29% as at the end of November at 409 TMT, and imports were down 85% to less than 5,000 MT, suggesting that availability of rapeseed will also be tight towards the end of the marketing year.

US drought and winterkill concerns are starting to get more attention now that we are past the January USDA supply and demand report. There are concerns about Russia too.

"Southern Russia winter wheat was planted under very dry conditions last fall and was weakly established. Less than half of normal rainfall was received September-November in many key wheat growing areas," say Martell Crop Projections.

"Unseasonably warm temperatures made fall moisture stress worse. Wheat germinating late, due to drought, may not have achieved maximum hardiness from a shortened fall growing period," they add.

The head of the Russian Grain Union is quoted on Reuters as saying "about 1.2 million (hectares of winter grains) can be written off because of dry weather conditions." This area will be replanted in the spring, although yields will inevitably be reduced.

News wires report that Algeria bought 400,000 MT of wheat overnight for mostly April shipment. French origin is said to be the most likely source, although Canadian wheat may also have featured.

With EU-27 wheat exports already running more than a third up on a year ago, despite reduced production, extra export business like this will only serve to tighten availability further later in the season.