EU Wheat Higher Heading Into USDA Report

11/07/13 -- EU grains were mixed but mostly firmer, although Paris rapeseed took another bath, falling around EUR5-7/tonne. The rest of market sat on its hands for most of the day waiting for the release of the USDA's WASDE report at 5pm London time.

London wheat closed with front month Nov 13 GBP1.00/tonne firmer at GBP171.00/tonne and Nov 13 Paris wheat ended EUR1.75/tonne higher to finish the day at EUR199.25/tonne. This was the highest close on London wheat for a month, and almost, but not quite, the same for Paris wheat.

Brussels confirmed that the 2013/14 marketing year is off to a fair start, issuing 166 TMT of soft wheat export licences, along with 142 TMT for barley and 149 TMT for corn in the first full week of the season. That takes soft wheat licences to 291 TMT already this year.

Egypt said that they only had half a million tonnes of imported wheat left on hand to blend in with lower quality domestic stocks - said to be of 3 MMT. Reports suggest that a deal has been done with UAE, Saudi Arabia and Kuwait who have offered Egypt USD12 billion in aid to tide them over the current political and financial crisis. Buying wheat and oil is said to be their number one priority, so we can maybe expect them to be back in the international tender market before long.

Libya bought 50 TMT of Russian wheat in a tender, and Algeria was said to have bought 4-500 TMT of optional origin (most likely French) wheat for Sep/Oct shipment.

The Czech Republic's Stats Office said that they expect a grain harvest this year of 6.53 MMT, up 15.7% on last year. Wheat yields are forecast up 25% and rapeseed yields to rise by 13%. The 2013 wheat crop is estimated at 4.4 MMT versus 3.5 MMT last year. The rapeseed crop is seen rising from 1.11 MMT to 1.31 MMT, whilst barley output will fall from 1.62 MMT to 1.57 MMT, they said.

The Russian wheat harvest rumbles on, producing 18.8 MMT of grains so far off 12.8% of the planned area, with yields said to be up 27% at 3.23 MT/ha. The harvest so far is mostly winter wheat, spring sown crops are said to generally be in a pretty poor state and will likely yield much lower.

MDA CropCast today cut their forecast for 2013 Russian wheat production by 1.2 MMT from last week to 50.5 MMT. That puts them in a similar area as SovEcon, IKAR and Lanworth. They also cut 1.0 MMT off Australia's wheat potential this year to 22.3 MMT.

As the EU market was closing the USDA came out with their July numbers, they didn't see the need to alter their Russian estimate leaving it unchanged at 54.0 MMT, whilst they actually raised Australia by 1.0 MMT from last month to 25.5 MMT.

Wheat production in Europe was also raised, although this was largely due to the inclusion of Croatia in the new EU-28. There were however small tweaks higher elsewhere, including raising UK output from 11.55 MMT to 11.75 MMT. Production in the EU-28 is now forecast at 138.6 MMT.

World wheat production in 2013/14 was revised upwards to a new record 698 MMT, although consumption is also seen at an all time high 700 MMT. One of the most significant changes was the upgrade of China's wheat import needs from 3.5 MMT to 8.5 MMT, which was more than most expected, even if still below Rabobank's recent 10 MMT forecast. Either number would be the highest since 1995.

World wheat ending stocks for 2013/14 were cut sharply, from the 181 MMT estimated last month to 172 MMT - the lowest since 2008/09.