EU Grains Close - Corn Bull Or Wheat Bear?

12/08/11 -- EU grains finished with Nov London wheat unchanged at GBP163.25/tonne and Nov Paris wheat up EUR1.25/tonne to EUR198.75/tonne. On the week as a whole Nov London wheat gained GBP3.65/tonne.

The USDA yesterday pretty much confirmed what has been pretty obvious for a while, the balance of wheat exporting power is switching away from the US and Europe and back to the Black Sea this season.

On the face of it for wheat this was a pretty bearish report. Russian, Ukraine and Kazakh production were all raised from last month by a combined 7 MMT, far ouweighing the 800,000 MT reduction seen coming from the US.

Export potential from the three major Black Sea nations was increased 5.5 MMT, seemingly at least partially the expense of US foreign sales which were reduced by 1.5 MMT from last month to 30 MMT, a 17% fall on 2010/11. EU exports were left unchanged from last month at 15 MMT, 33% down on 2010/11.

French wheat production was raised 1.15 MMT from last month to 34.5 MMT, with UK output tweaked fractionally higher to 14.8 MMT and Germany's left unchanged at 22.2 MMT.

World ending stocks in 2011/12 are now seen at close on 189 MMT, 6.7 MMT up on last month.

Support for wheat has come from corn, particularly US corn, where production this year is now forecast at 328 MMT, 14 MMT down on last month. Even so that is 12 MMT more than in 2010 and the second largest US corn crop in history.

Although world corn ending stocks were pegged only 1.1 MMT lower than last month at 114.5 MMT, it's US corn stocks that the market is fixated with. These are seen falling to 18 MMT and US stocks have only been lower than that once since the mid-1970's.

World wheat stocks at the end of the 2011/12 season meanwhile are the second highest in the last ten years, and US stocks the third largest in the last ten.