London Wheat Hits 5 1/2 Year Low

03/02/16 -- EU grains finished the day mixed. Mar 16 London wheat took out the previous low, to set a fresh lowest close for a front month since the early summer of 2010.

At the close of trading, Mar 16 London wheat was down GBP0.45/tonne at GBP105.80/tonne. In Paris, Mar 16 wheat was down EUR0.75/tonne at EUR159.75/tonne, Mar 16 corn was up EUR0.25/tonne at EUR153.25/tonne and May 16 rapeseed slumped EUR4.75/tonne to EUR363.00/tonne.

In London, the May 16/Nov 16 old crop/new crop spread widened further to GBP10.80/tonne. That's a fairly cavernous gap, but not one that looks like narrowing just yet either. How much wider can that go? I guess that depends on cashflow needs between now and next harvest, along with the continued ability to store the 2015 crop once we begin 2016.

It currently seems unlikely that, when we get much closer there, that new crop Nov 16 will still command a GBP8.20/tonne premium of GBP8.20/tonne over old crop Jul 16 as it does tonight. One needs to make some sort of a move to meet the other, and old crop rallying much in the face of such large, some would say unprecedented, domestic and EU carryover might be unlikely.

We could of course have a crop disaster somewhere around the world by then - it seems like an awfully long time since we had one of those doesn't it? That might help, regardless.

Ukraine and Russian weather conditions are turning mild, with snow melting, but few predicting that the winter has ended there just yet. Lack of adequate snow cover at this time of year increases the change of winter-kill as and when harsh frosts return to the region, as they inevitably do, before we can truly say that spring is here.

The USDA's FAS in Russia pegged their final 2015 wheat production estimate at 61 MMT, up 3% versus the previous year. Barley output is seen down 15% at 17.1 MMT and corn production up 12.7% to a record 12.7 MMT.

They estimate 2015/16 total grain exports at 31 MMT this season, down slightly from 31.5 MMT in 2014/15. Wheat exports will rise 1% to 23 MMT, corn exports increase 18% to 3.5 MMT, but those for barley dip 31% to 3.7 MMT, they predict.

Egypt would appear to have shown their true colours: Delaying wheat shipments due to "administrative" problems with letters of credit; rejecting some shipments for failure to comply with contract terms: introducing new almost impossible to stick to new contract terms; and now today reportedly asking Russia if it would like to extend it some "special" extended payment terms (a minimum of 6-months is what I am hearing - presumably in exchange for an already guaranteed ergot-free discharge when the vessels finally do make it port).