New Crop London Wheat Ends Within Pennies Of Contract Low

03/01/14 -- EU grains closed mostly a little lower in thin trade, with many participants still absent from the market until next week.

Jan 14 London wheat ended GBP2.30/tonne lower at GBP160.95/tonne, and Nov 14 fell GBP1.55/tonne to GBP150.10/tonne. Jan 14 Paris wheat finished unchanged at EUR208.00/tonne and is now at a near EUR6.00/tonne premium to second month Mar 14. Jan 14 Paris corn fell EUR1.00/tonne to EUR172.50/tonne, whilst Feb 14 Paris rapeseed was up EUR1.25/tonne to EUR366.50/tonne.

New crop Nov 14 London wheat closed within ten pence of the lifetime contract low set in August, and now sits almost GBP29.00/tonne below the contract high set in November 2012. The outlook for sharply higher UK wheat production this year, along with a more modest rise in Europe and a whole, plus another potential bumper corn crop in Ukraine and Russia in 2014 is weighing on new crop values.

For the week, front month London wheat was GBP3.05/tonne lower, with Nov 14 down GBP3.65/tonne. Front month Paris wheat was down EUR0.75/tonne, Paris corn was up EUR0.25/tonne and Paris rapeseed was EUR0.50/tonne lower. Euro weakness has helped Paris grains from slipping too much this week, despite Chicago wheat falling to fresh 19-months lows.

HSBC forecast the euro/pound to remain relatively flat across 2014, ending the year at 85 pence versus just under 83 pence currently. They estimate that the pound will gain against the US dollar, hitting 1.46 by September. For interest, last year they estimated that the euro would appreciate from 81 pence to 87 pence during the course of 2013 - so they were partially right.

They also indicated at the beginning of 2013 that London feed what would end the year at GBP165.00/tonne - a very decent call, especially as the front month was over GBP200.00/tonne and Nov 13 was trading around GBP185.00/tonne at the time.

This year they are using GBP150.00/tonne as their base price for ex farm feed wheat here in the UK.

Algeria bought 500-550 TMT of optional origin wheat in a tender at levels around USD314-315/tonne C&F. It is thought that at least some, if not most of that will come from France.

Egypt's GASC bought a similar volume - 535 TMT, including 180 TMT of French, 180 TMT of Romanian, 120 TMT from Ukraine and 55 TMT from Russia. The prices paid were all around USD317/tonne C&F. US wheat missed out again due to freight considerations, although it was priced up much cheaper that EU or Black Sea wheat on an FOB basis.

The news of the size of the Egyptian purchase came through too late to affect the market in Europe, but the fact that two big North African buyers booked over a million tonnes between them will most likely support the market on Monday. The Egyptian purchase was said to be their largest single wheat buy since at least 2010.

In the state of Western Australia, CBH Group, who are responsible for the commercial storage of the vast majority of the crop, say that they've so far taken in a record 15.6 MMT of grains - and that this could rise to 15.8 MMT or even close to 16.0 MMT by the time everything has been delivered. The previous record volume handled from an entire harvest in the state was 15.06 MMT. WA is the main export hub in Australia.

China's Ministry of Agriculture say that their winter wheat crop is in the best condition it's been at this time of year since 2005.

The Buenos Aires Grain Exchange kept their forecast for this year's Argentine wheat crop unchanged at 10.35 MMT. The harvest is so far 84% complete at 8 MMT, but crucially regions such as the southeast of Buenos Aires (47% done) are delivering very good productivity, which will boost the final national output, they say.