EU Wheat Slumps On Negative USDA Data

12/01/12 -- EU grains ended with Jan 12 London wheat down GBP4.50/tonne, or 2.9%, to GBP152.00/tonne and Mar 12 Paris wheat down EUR7.25/tonne, or 3.6%, to EUR194.00/tonne.

The much awaited USDA report, which was expected to be bullish by many in the market, sent the market crashing in afternoon trade with US corn going limit down - the sixth successive limit move it has posted on this day in January. Three of the last four have now been limit down moves.

Argentine corn production was cut as expected, but at 26 MMT it's still a record crop. Brazil's corn crop was left unchanged at 61 MMT, also an all-time high. Soybean production for both was trimmed, by 1.5 MMT in the case of Argentina and by 1 MMT for Brazil. Even so both numbers would still be the second highest output in history.

On the wheat front US plantings were forecast higher than most anticipated at 41.9 million acres. World production was raised 2.5 MMT to a record 691.5 MMT by virtue of a 1.5 MMT upgrade for Kazakhstan (of whom they've had their estimate far too low for some time now), 0.8 MMT more from Brazil and a small increase for Russia too.

World wheat ending stocks in 2011/12 were raised 1.5 MMT to 210 MMT, which is now less than half a million away from being the highest ever and 8 MMT more than the so called burdensome levels of 2008/09.

There were also some minor tinkerings with world wheat exports with Australia's potential reduced 1 MMT and Russia and America's increased by 0.5 MMT each - the latter looking particularly unlikely to be achieved.

Elsewhere FranceAgriMer increased slightly their estimate for the 2011 harvested soft wheat crop to just under 34 MMT, a 5% drop on 2010. Exports within the EU are seen holding steady with last season at 6.6 MMT, but exports to non-EU destinations are forecast to fall by around a third to 8.7 MMT.

Despite the recent bout of euro weakness Brussels was only required to issue 167,000 MT of soft wheat export licences in the week to Jan 10th. That brings the marketing year to date total to 7.53 MMT, a 37% decline on this time last year.

The euro reversed that trend and was sharply higher today after promising bond auctions from Spain and Italy, helping to explain the larger decline for Paris wheat than it's London counterpart this afternoon.