EU Wheat Closing Comments

EU wheat futures closed unchanged to slightly lower Friday in another quiet holiday-ish session. Paris March wheat futures closed down EUR1.25 at EUR126.50/tonne, London feed wheat closed unchanged across the board, with January at GBP91.75/tonne.

The market appears to have found it's correct level for the time being. Big exportable surpluses will continue to weigh right up until the 2009 crop.

According to the HGCA, the UK exportable surplus is 3.987 million tonnes.

Certainly the weak pound should help some find an export home, with sterling setting record lows against the euro on a seemingly daily basis at the moment. The latest one came Friday, with the pound closing at 1.1186, it's lowest ever close since the single currency's inception in 1999. Earlier in the day the UK currency hit an intra-day all-time low of 1.1119.

The Australian crop continues to be dogged by rain. As well as wheat being downgraded there are now problems with a "pink mould" fungus. Final output is expected to be a little under 20mmt, 7mmt up on last season, but around 4-5mmt under what was hoped for earlier in the season.

The Argentine crop is likely to come in around 10mmt, 6mmt or 37.5% down on a year ago.

The crop in the US is at threat from winterkill this weekend as very cold Arctic air blasts down from the north, putting crops not under snow in the Plains at risk.

Strategie Grains this week came out with their first estimate for the 2009 UK wheat crop, weighing in with an 8% reduction, at just over 16mmt. They also issued their first figures for the Spanish crop, dropping soft wheat production there by 15% to 4.712mmt.

In the US Informa said Friday that they projected 44.08 million acres of winter wheat planted for 2009 down from 46.2 million in 2008, a 4.5% reduction in area.

Informa also see plantings in Russia down 4.5% and in China down 6.25%.

In the Ukraine wheat planted area is down around 7% according to Informa. According to UkrAgroConsult, plantings are down more than 13% to 6.067m ha from 7.0m ha last season.

A recent survey by Farming Online says that in the UK only 80% of the planned acreage of winter wheat is established, with a further 10% sown very late or not at all.

It's no great surprise that farmers the world over are planting less, just as it was no great shock to see them plant wheat in their own backyards 12 months ago.

Add a few weather problems and yield reductions into the mix and the 2009 crop may well be significantly lower than most people seem to think at the moment.