EU Wheat Attempts Mini Recovery From Recent Rout

13/06/13 -- EU grains closed mixed after attempting a tiny recovery following yesterday's declines and the recent rout, although they did get dragged down heading into the close as US grains turned sharply lower for a second day.

As of last night front month Jul 13 London wheat was down GBP16.00/tonne, or 8.8%, for month of June so far. Nov 13 London wheat has fallen GBP9.50/tonne, or 5.3%, and Nov 13 Paris wheat is down EUR8.50/tonne, or 4.1%, in the same period.

Jul 13 London wheat finished Thursday unchanged at GBP166.50/tonne and Nov 13 ended GBP0.50/tonne easier at GBP168.50/tonne. Nov 13 Paris wheat settled up EUR0.25/tonne at EUR197.75/tonne. The two new crop November months are currently running at around parity.

The vibe at day one of Cereals 2013 was certainly a bit more optimistic for UK production prospects this year than it would have been if the event had been held a couple of months ago. ODA said that the UK wheat crop might come in around 11.5 MMT this year, the Anderson's Centre were very much in the same ballpark at 11.4-11.5 MMT, whilst the HGCA's Jack Watts was a bit more hopeful at 12.0 MMT. A crop of 11.5 MMT would be down 13.5% on last year, output of 12.0 MMT would be a 9.8% drop.

As we have already discovered though, there's plenty of opportunity for the UK to import wheat if the price is right. UK imports might finish up around 3 MMT this year, so there's no reason to think that they couldn't be at least that high again in 2013/14. The pound is doing it's best to help at nearly 1.57 against the dollar.

Talking of imports, the weekly export line-up out of the leading French grain hub of Rouen for the week through to Wednesday showed another 8,800 MT of French soft wheat heading for the UK.

SovEcon raised their estimate for the Russian wheat crop this year from 50 MMT to 52 MMT, up 38% on last year, although still 2 MMT lower than the USDA's revised forecast of yesterday. The respected Russian analysis group now forecast their wheat exports at 14-15 MMT in 2013/14 versus the USDA's 17 MMT, saying that some of this surplus production will be needed to replenish depleted government intervention stocks.

MDA CropCast estimated the Russian wheat crop very similar to SovEcon at 51.8 MMT today. They cut 2.1 MMT off their global wheat production estimate to 678 MMT, some 18 MMT lower than the USDA. They also forecast the EU barley crop at 54.7 MMT, versus 55.6 MMT from the USDA and 52.7 MMT in 2012. They have the EU rapeseed crop down 390 TMT on last week to 19.06 MMT, versus 19.7 MMT from the USDA and 18.51 MMT last year.

"Rains remained active across southern Germany, Poland, and Czech-Slovak Republics this past week, and also increased across southwestern France, Romania, and Bulgaria. The rains in Germany, Poland, and Czech-Slovak Republics maintained wetness and also increased flooding problems," they said.

Oil World side with the USDA on EU rapeseed production, pegging the crop at 19.72 MMT. They forecast output in Germany rising 14% to 5.5 MMT, although the French crop is seen falling more than 10% to 4.9 MMT and the UK crop dipping 26% lower at 1.9 MMT.

On a global level, Oil World estimate this year's rapeseed crop at 63.48 MMT versus 62.6 MMT in 2012. The Canadian crop is forecast up 4.3% to 14.5 MMT, with output in Ukraine rising almost 54% to 2.0 MMT - much of that will be destined for Europe. They see production in Australia falling nearly 19% to 3.2 MMT, the same as ABARES said yesterday, on reduced plantings.