EU Wheat Ends Mixed But Longer Term View Looks Bearish

23/02/12 -- EU grains finished all over the place with front month Mar 12 London wheat up GBP1.25/tonne to GBP166.00/tonne and Mar 12 Paris wheat down EUR2.25/tonne to EUR209.75/tonne.

Most active May 12 London wheat opened GBP3.00/tonne higher, but was never able to hold at that level and finished the day GBP0.10/tonne lower. Other London months ranged for GBP2.00/tonne lower on Mar 13 to GBP3.00/tonne higher on Jul 13.

London wheat fared generally a bit better than Paris wheat as the pound slipped below 1.18 against the euro for the first time in 10 weeks, despite the European Commission forecast of a shrinking euro-zone economy in 2012, on the Greek debt deal and ideas it has become too heavily oversold.

Brussels granted 298 TMT of soft wheat export licences this past week, whilst far from stunning that's the best weekly total for some time. When compared to last week's paltry 47 TMT, things could surely only have improved.

Even so, that only brings the year-to-date total to 8.7 MMT fully 34 weeks into the 2011-12 marketing year, a figure that still leaves us languishing 36% behind last season's levels.

Reports suggest that Spain has bought two cargoes (85,000 MT) of soft wheat from the US in the past 24 hours, further highlighting the currently uncompetitive nature of European prices.

The International Grains Council upped their estimate for the 2011/12 world wheat crop by 5 MMT to 695 MMT, which is around 2 MMT higher than the USDA currently forecast. The global corn crop was increased 3 MMT to 864 MMT, which now matches the USDA's thinking.

Corn production in Brazil and Argentina is seen at 60.5 MMT and 22 MMT respectively by the IGC. The Brazilian number would be a record despite drought in the south, aided by increased plantings and optimism over yields from early planted second crop corn which is going into the ground now.

The USDA predicted an all wheat area for the 2012 US harvest of 58 million acres, 1.5 million above last week's number and 6.6% up on last year. They also reiterated last week's corn area at the highest since 1944 at 94 million acres.

The market is looking for direction, balancing tight corn supplies and an assortment of weather worries around the world nearby, against potentially record corn production and record large wheat stocks going forward.

The IGC increased their estimate for 2011/12 world wheat ending stocks by 7 MMT to 211 MMT, adding that larger corn and barley production in the year ahead will probably reduce feed wheat consumption, meaning that 2012/13 wheat ending stocks will only see a modest decline from the predicted record levels of this season.