London Wheat Ends At Best Levels Since Late August

07/10/13 -- EU grains closed mostly higher on strong underlying interest on the international tender front and continued concerns over delayed winter wheat plantings in Russia and Ukraine.

The market closed with Nov 13 London wheat settling GBP1.50/tonne firmer at EUR160.25/tonne and Jan 14 up GBP1.75/tonne at GBP162.50/tonne. Nov 13 Paris milling wheat rose EUR1.75/tonne to EUR196.25/tonne whilst Nov 13 Paris rapeseed was down EUR1.25/tonne at EUR366.75tonne.

This was Nov 13 London wheat's first close above GBP160/tonne since late August, despite feed barley being available at a substantial discount. Maybe there just isn't that much feed wheat about thi year. The HGCA report average UK wheat test weights of 77.1 kg/hl this year versus 69.6 kg/hl in 2012. Average hagbergs are very high at 319 - the highest value recorded since 1990, with protein contents coming in at 12.3% and moisture 14.7%.

Will an impeding deluge of new EU/Black Sea crop corn change the feed grain supply and demand dynamics?

Whilst the popular market newswires remain full of stories of planting delays in the FSU, private analysts suggest that things have finally turned drier and warmer, giving winter wheat growers there a potential window of opportunity. "Dry, warm & plenty of soil moisture, forecast for settled two weeks, wheat planting currently going flat out," said Ukraine agronomist Mike Lee on Twitter this morning.

There are various tenders around on the export front. Iraq seeks 50 TMT (but usually buys more) of wheat from the US, Canada, the Black Sea region, Australia and/or Germany. Algeria seeks 50 TMT of optional origin (French would be the favourite) milling wheat for Dec shipment. Jordan seeks 100 TMT of optional origin milling wheat for Feb/April along with 100 TMT of optional origin feed barley for March/May. Bangladesh are also in the market for 50 TMT of optional origin wheat for Nov/Dec shipment.

Copa Cogenca pegged the EU-28 cereal harvest at 298 MMT, up 9.5% on last year. They estimate the wheat crop here (excluding durum) at 134 MMT, up 8.6%, with a durum crop of 8 MMT representing a rise of 2.6% on last year. They also see barley output at 59 MMT, up 7.9%, and corn production at 64 MMT, up 13.2%.

The French Farm Ministry today raised their forecast for soft wheat production there from 36.7 MMT to 36.9 MMT. They tweaked corn output a little lower from 15.6 MMT to 15.4 MMT.

Ukraine's grain harvest now stands at 39.3 MMT, including 6.2 MMT of corn. The Ukraine Ministry said that grain exports this marketing year (to Oct 4) stand up 11.4% on last year at 6.3 MMT, including 3.87 MMT of wheat, 1.7 MMT of barley and 0.75 MMT of corn. They've also exported 1.43 MMT of OSR already in 2013/14.

The Russian Ministry said that they are to defer their intervention purchase program for a week due to the delayed harvest. They are expected to buy 2-3 MMT of grains between Oct 15 and the year end,

SovEcon said that Russia’s winter grain planting area may fall to 13.0-13.5 million ha versus 16.4 million a year ago.

Whilst much of the trade concern is centred around delayed crop planting in Russia/Ukraine, French winter wheat plantings are 9% done versus 3% a year ago, with barley planting 16% complete compared with only 4% this time last year, FranceAgriMer said Friday. UK wheat planting is also well advanced for early October. We can't have a third crop disaster in a row in 2014 can we?

The current UK wheat/barley pricing structure and near ideal field conditions would suggest that winter wheat plantings in the UK should recover strongly, and prospects for production in 2014 currently indicate a potential return to the halcyon days. Certainly a 16 MMT crop could be on the cards, and maybe more.