EU Wheat Falls, Russian Harvest May Be Understated

29/08/13 -- EU grains were mostly lower, in line with declines across the pond in US wheat and corn. The market appears to be struggling with the notion that whilst the world corn crop might be shrinking a little, it is still going to be record one and much higher than output in 2012.

Nov 13 London milling wheat settled GBP1.85/tonne lower at GBP157.75/tonne, and Jan 14 was GBP1.50/tonne easier at EUR160.00/tonne. Nov 13 Paris milling wheat fell EUR1.00/tonne to EUR188.25/tonne.

Note that May 14 Paris milling wheat ended at EUR189.50/tonne, making it around  a GBP2.00/tonne discount to May 14 London feed wheat on a GBP equivalent basis.

US soybeans are staging a fairly good attempt at a rally, but corn and wheat are getting left behind.

MDA CropCast cut their world 2013/14 corn crop estimate by 5.8 MMT from last week to 924.7 MMT, even so that is still well over 100 MMT (almost 13%) more than output in 2012/13.

They raised their EU soft wheat production forecast by 300 TMT to 134.9 MMT, close to Toepfer's estimate of 134.6 MMT of yesterday.

The Russian grain harvest now stands at 59.4 MMT off 52.9% of the planted area. Wheat accounts for 38.9 MMT of that off 54.4% of the planned area. Wheat yields are up 43% on last year at 2.85 MT/ha, although down 3% on 2011.

If we were to predict that this year's final Russian wheat crop would be up 43% on last year, not an outrageous assumption given that optimism is high that Siberia is forecast to produce a decent if not record crop this year, then we'd finish up with output of 53.9 MMT in 2013. A crop 3% down on 2011's would bring production to 54.4 MMT this season.

It is starting to feel like the predictably cagey Russians may have been guilty of deliberately under-estimating this year's crop. SovEcon today increased their Russian wheat production forecast from 50.5 MMT to 51.7 MMT.

Bloomberg reported today that the Egyptian Ag Minister estimated the 2014 domestic wheat crop at 8 MMT. In theory that would leave them needing to import more wheat in 2014/15, if they can afford it. Yesterday's Egyptian wheat purchase totalled USD78 million, according to Agrimoney.

Israel bought 25 TMT of corn, 12 TMT of feed wheat and 12 TMT of feed barley of optional origin (possibly Black Sea region – most likely from Ukraine) for Sep/Dec shipment.

Defra said that on farm wheat stocks as at the end of June 2013 were the highest since 2010 and a 23% increase on June last year. UK wheat stocks held by ports, merchants and co-ops were up 21% year-on-year and also the highest since 2010. Imported wheat stocks were more than double the level of June 2012, they added.

A leading investment bank are advocating selling Nov 13 Paris rapeseed short, saying that the short-term up-trend has not broken the long-term down-trend.