Front Month London Wheat Slumps To New 11-Month Low

21/05/13 -- EU grains closed mixed, after having traded down to fresh lows for the recent move in early trade. Sterling weakness helped London wheat a little following news that domestic CPI inflation had fallen from 2.8% in March to 2.4% in April. That was taken as potentially widening the scope for further QE from the Bank of England. The minutes of the May MPC meeting are due out tomorrow.

May 13 London wheat finished GBP1.25/tonne lower at GBP177.25/tonne - an 11-month low for a front month - and new crop Nov 13 ended GBP0.40/tonne higher at GBP176.40/tonne. Nov 13 Paris wheat settled EUR0.75/tonne firmer at EUR204.00/tonne.

Fund money continues to shy away from commodities, seeing other investments as potentially offering more lucrative returns. Heading into the London close the FTSE100 looked like it was going to finish at a fresh 12 year high. Both the Dow Jones Industrial Average and the Standard & Poor's 500 Index are also hovering around historic highs.

The EU Commission's MARS unit released their revised May forecasts for yields, trimming slightly the outlook for wheat, corn and OSR and raising marginally it's estimate on barley. "In general, the current prospects for EU-27 yields remained close to the average," they noted, despite acknowledging problems in the UK and Ireland.

EU-27 soft wheat yields were forecast down from 5.63 MT/ha last month to 5.54 MT/ha this time round. That's still up 2.4% on last year, but slightly lower than the 5 year average of 5.63 MT/ha. UK yields were estimated at 7.68 MT/ha versus 8.02 MT/ha last month. That would still be up 15% or 1.0 MT/ha on last year if they are correct, and marginally ahead of the 5 year average of 7.66 MT/ha.

EU-27 barley yields were seen averaging 4.56 MT/ha versus 4.48 MT/ha last month, up 4.8% on last year's 4.35 MT/ha. UK barley yields were predicted at 5.54 MT/ha versus 5.52 MT/ha last month and last year.

EU-27 corn yields were estimated at 6.87 MT/ha versus 6.96 MT/ha last month, up more than 16% on year ago levels even if slightly below the 5 year average of 6.97 MT/ha. EU-27 OSR yields were estimated at 3.06 MT/ha versus 3.09 MT/ha last month and 3.10 MT/ha last year. The 5-year average is 3.04 MT/ha. UK OSR yields were only dropped slightly from last month's forecast of 3.50 MT/ha to a still very ambitious looking 3.32 MT/ha, which is only marginally down on last year's 3.40 MT/ha yield.

For the UK they noted that the "growth cycle remains delayed for all crops leading to high uncertainty in yield forecasts." In Germany they said that "the significant delay at the end of March has mostly been recuperated and a boost in vegetative growth has been observed since mid-April. Spring sowing started with a slight delay but the weather was favourable for a prompt germination."

In France "remote sensing indicators suggest a much more favourable outlook in the northern half of the country than a few weeks ago, although there is still a noticeable delay in crop development of winter cereals compared to the average, of about 10 days for Centre, Pays de la Loire and up to 20 days for Champagne-Ardennes and Picardie," they said.

In international news the Russian Grain Union revised their forecast for grain production there this year from 90-95 MMT to 90-100 MMT. They increased their 2013/14 grain exportable surplus estimate from 20 MMT to 25 MMT. The Russian government sold 39,196 MMT of intervention grain in this week's tender, bringing the total volume sold since sales began last October to 3.23 MMT.

India's MMTC withdrew a tender to sell 100,000 MT of wheat after only picking up one bid at USD268 - some USD32/tonne below the government's minimum target level of USD300/tonne.

German milling wheat for May delivery in Hamburg was said to be offered at EUR230/tonne (USD297/tonne), with new crop September offered at EUR208/tonne (USD268/tonne).

Israel seeks 80 TMT of corn, 60 TMT of feed wheat, and 20 TMT of barley for June/Sept shipment of North American, South American, European or Black Sea origin.