EU Wheat Lower, But Faring Much Better Than CBOT Market

02/04/13 -– EU grains closed a volatile session lower, although old crop months were well off the lows of the day set in early trade. The market is clearly struggling to come to terms with the US market collapse that took place largely whilst European markets were shut on the evenings of Thursday and Monday, combined with attempts at a mini recovery today.

London wheat closed with front month May 13 down GBP1.35/tonne at GBP197.90/tonne and new crop Nov 13 GBP4.40/tonne easier at GBP181.40/tonne. May 13 Paris wheat was EUR2.00/tonne lower at EUR236.75/tonne.

Heading into the close of European markets May 13 Chicago wheat was trading around USD6.70/bu, a fall of 9% versus last Wednesday evening, pre-USDA. Based on tonight's close May 13 London wheat is "only" 3% down versus it's last Wednesday finish, with May 13 Paris wheat down 4% in the same period, so clearly EU grains have managed to weather the storm kicked up across the Atlantic on Thursday night relatively well under the circumstances.

There are still plenty of question marks over wheat production potential both sides of the Pond to completely throw the towel in just yet. In the States the USDA reported after the close last night that nationally only 34% of the winter wheat crop is rated good/excellent, that's the lowest proportion since 31% in 2002, and 28% of the crop was abandoned and never saw a combine that year. This was the USDA's first weekly update since the end of November, as they don't issue weekly reports in the depths of the winter. You may recall that in their final report of 2012 US wheat was heading into winter in the worst condition since they started publishing weekly figures in the mid-1980’s.

Last November's data had winter wheat rated good/excellent at 33%, so we've only seen an improvement of just one percentage point in fully four months. In fact the proportion of US winter wheat rated poor/very poor was 26% at the end of November, last night it was 30%, so although there has been a slight shift from fair to good/excellent, there's been an even larger one from fair into poor/very poor.

In Europe, the recent cold snap and widespread snow cover has certainly put crop development and fieldwork back at the very least, how much damage may have been done it's too early to say. FranceAgriMer report that spring barley plantings are only 75% done versus 97% in 2012, with only 20% of the crop emerged against 50% last year. Both winter wheat and winter barley ratings held steady at 66% and 67% respectively good/excellent versus last week. However, note that soft wheat development, judged by the percentage of the crop with an ear of 1cm or more, is only 11% versus 63% last year. Winter barley at the same stage of development is only 9% versus 64% twelve months ago.

Concerns meanwhile abound over the state of crops in the UK after one of the coldest March's for years went out with a record breaking cold over Easter. Temperatures are set to remain low until around mid-April although at least no more significant snowfall is in the forecast. Whilst the cold weather has reduced cereal disease development and weed germination, pigeons have caused some severe damage in oilseed rape crops, the HGCA note.

The demand side of the coin also has uncertainties of it's own however. Ensus, Europe's largest fully-operational wheat ethanol plant, has confirmed recent rumours that it is to close again due to "adverse market conditions" - according to That's less than eight months after re-opening following a shutdown in May 2011 that lasted until August 2012, they add.

Further afield, the Russian Ag Ministry said that winter grains have been planted on 15.85 million hectares, down 2.8% from 16.3 million a year previously. Overall crops are rated 88% good/satisfactory and 12% weak/thinned, they said. Generally it seems that crop conditions are poorest in the south of the country, the main winter wheat production areas.

Russia sold 58,558 MT of intervention grains today in it's now regular twice weekly auction. That brings the total volume sold to date since sales began last October to 2.6 MMT. The boards will be bare come harvest 2013.

Things still look promising in Ukraine, although recent heavy snow still remains on the ground and will delay fieldwork by 2-3 weeks. The Ukrainian Agrarian Confederation said that this year's grain crop may reach 54-56 MMT, an increase of 8-10 MMT compared with last year.

The Ukraine Ministry said that the country exported 1.6 MMT of grains in March. Almost all of this was corn, at 1.5 MMT, as wheat exports have now ground to a halt. There is some suggestion though that the Ministry may authorise a bit more wheat for export in the three months of the 2012/13 campaign that remain.