EU Wheat Recovers As Weather Concerns Remain

22/02/12 -- EU grains finished mixed but mostly higher. Mar 12 London wheat closed down GBP2.25/tonne to GBP164.75/tonne and Mar 12 Paris wheat climbed EUR0.25/tonne to EUR212.00/tonne.

Today was a day of consolidation after some fairly sizable losses yesterday. EU weather concerns have switched from winter kill to drought. Large parts of the US have also experienced a unseasonably dry winter, whilst virtually no rainfall at all during Sep/Oct/Nov means that a third of Ukraine's winter crops will need replanting in the spring.

The trade is anticipating significant increases in corn and wheat plantings from the USDA's Ag Forum which starts tomorrow. Ending stocks of both for the season ahead should also increase, with corn carryout potentially doubling. Their thoughts are less likely to be bearish for soybeans though, with plantings seen a million acres lower, reducing carryout to around 250 million bushels from 275 million this season.

There's a major winter storm coming for very dry areas of US Upper Plains on Feb 26-27 and maybe again Mar 2-3, say That will help replenish depleted soil moisture ahead of spring plantings of wheat, corn and soybeans but plenty more is needed.

"The soil profile is dry through a very deep layer. Thus, much more precipitation is needed in the Upper Midwest before corn is planted, usually the first week of May," say Martell Crop Projections.

Ukraine's Ag Minister says farmers there need to resow nearly 3 million ha of winter grain areas and nearly 0.5 million ha of winter rapeseed this spring. They estimate the 2012 grain harvest in a fairly wide 42-50 MMT range (from a record 56.7 MMT in 2011). Of that wheat is expected to account for 15-16 MMT, around 30% down on last year.

Ukraine and Russia will stay cold over next 8 days, with a possible big snow event for eastern Ukraine western Russia March 2-3, say That looks like continuing to disrupt grain exports out of the Black Sea.

Western & central Europe and the UK will be largely warm and dry for the next 7-10 days, which will spread East into Eastern Europe by days 9-10, say Of the "Big 3" EU grain producers, Germany is currently the only one with adequate field moisture, say Martell Crop Projections. "France has grown dry over the past 7-8 weeks receiving only scanty precipitation in the farm belt," they add.

Meanwhile, much of the heavier rain that fell across the UK today was confined to northern and western areas, with only lighter showers for the Home Counties.

There are probably enough weather-related question marks in amongst that lot to underpin the market for now.