EU Wheat Rises On Argentine Frosts, FSU Rains

25/09/13 -- EU grains closed higher across the board with Nov 13 London wheat settling GBP2.85/tonne firmer at EUR155.85/tonne and Jan 14 GBP3.15/tonne higher at GBP158.30/tonne. Nov 13 Paris milling wheat was up EUR3.25/tonne to EUR190.75/tonne whilst Nov 13 Paris rapeseed rose EUR2.50/tonne to EUR365.00/tonne.

Chicago wheat firmed on short-covering following reports that Argentina's crop (currently at the heading stage) was at risk from sub-zero temperatures overnight, with more of the same forecast for the weekend. That was the catalyst to take EU wheat higher with it.

Incessant rains also continue to disrupt the Russian and Ukraine grain harvests, and also the winter planting campaign.

Russia's grain harvest is less than three quarters done at 73% complete, producing 74.7 MT so far. The wheat harvest accounts for 46.3 MMT of that off 75% of plan, with yields coming in at 2.46 MT/ha versus 1.86 MT/ha last year.

The Russian corn crop is less than 13% harvested. Ukraine's corn crop also faces production and quality downgrades as it struggles to get harvested.

The rain and delayed harvest meanwhile means that Russian and Ukraine growers are also challenged to get their winter crops sown before the weather bites. Russia has only sown around 7 million hectares of winter grains, down 1.77 million on this time last year, a figure that only represents 42.8% of the planned area.

Domestic Chinese wheat prices are at record highs, according to Reuters. That is fostering the notion that they will soon be back in the market again for wheat, some reports suggest that they are currently actively seeking US/Canadian/Australian wheat to add to their existing purchases for 2013/14. One Chinese analyst said that the government may soon begin auctioning off state-owned wheat reserves in an effort to curtail rising prices. That could also stimulate some import interest.

Some of this news isn't particularly new today, but with fund money holding a hefty wheat and corn short position in Chicago, and a USDA quarterly stocks and wheat production estimate coming out on Monday, it's enough to trigger some short-covering.

The possible downgrade to Argentina's 2013/14 wheat crop wouldn't be such an issue if it wasn't for the fact that Brazil has been such an active importer of late. Their own crop is already known to have been badly damaged by frost, and they are South America's largest wheat buyer. What they can't buy from Argentina they will be forced to look outside the Mercosur trade bloc to purchase. They are supposed to have bought 1-2 cargoes of Canadian wheat and 2 cargoes of wheat from Poland in recent days, according to trade gossip.

Meanwhile EU wheat exports continue unabated. Germany exported 651 TMT of wheat in July, the first month of the new marketing year, up 79% versus July 2012, according to customs data out today. French exports were also higher in July at 961 TMT. Potential quality issues with Russian wheat will likely push more interest the way of France and Germany later in the season.

APK Inform report that Ukraine was the top supplier of wheat to the EU in 2012/13, being responsible for 28% of our imports. The US was second at 19% and Canada third at 14%, they say.