EU Wheat Futures Dive Following USDA Numbers

EU wheat futures closed sharply lower Tuesday following bearish stocks and production data from the USDA.

London Mar feed wheat ended down GBP1.65/tonne at GBP107.50/tonne and Paris March milling wheat was EUR4/tonne lower at EUR131.50/tonne.

Recent reports from the USDA have highlighted how US stocks have more than trebled since 2007/08, including the addition of a further 2 MMT to those stocks this month alone, now pegging 2009/10 carryout at 26.55 MMT, compared to 8.32 MMT just two seasons ago. That equates to the largest ending stocks number since 1988.

To add insult to injury they also dropped world consumption by more than 2 MMT in January, taking global ending stocks to 195.6 MMT, a 62% increase in just two years.

The USDA also cut its estimate for US wheat exports in the current 2009-10 marketing year to 825 million bushels, the lowest figure since 1971-72.

Despite a significant quantity of corn still standing unharvested in US fields, the USDA also increased the size of the US 2009/10 crop to an all-time record 334 MMT on the back of yields averaging an eye-popping 165.2 bu/acre, 4.8 bu/acre more than the previous record.

The report highlights the burdensome nature of current US and global stocks, and the fact that America is struggling to compete internationally on the wheat export market. It highlighted this last month too when it referred to US wheat being at a “competitive disadvantage” to other global exporters, citing freight and other logistical differences.

Bullish planting statistics for winter wheat in the US got swept away by a tide of bearish stocks sentiment.

EU wheat moved sharply lower once the US markets opened, but didn't really have time to fully reflect what turned out to be a 32-36 cent loss in wheat futures across all three US exchanges. The could well be some follow-through in the morning.

Egypt are tendering to two cargoes of wheat, saying that they are looking for 60,000 MT of US/Canadian wheat plus a further 60,000 MT from the usual suspects. It will be interesting to see if they do buy US wheat and if so at what premium to Black Sea/EU wheat it comes.