EU Wheat Rises, Paris Rapeseed Closes At 14-Month High

05/04/12 -- EU grains finished higher, with the exception of malting barley futures. May 12 London wheat ended GBP2.25/tonne higher at GBP171.75/tonne, whilst new crop months were GBP0.55/tonne steadier. May 12 Paris wheat ended EUR2.00/tonne higher at EUR211.25/tonne, Nov 12 was EUR2.25/tonne firmer at EUR204.75/tonne.

For the holiday shortened week as a whole May 12 London wheat closed GBP3.00/tonne lower with May 12 Paris wheat EUR1.50/tonne easier. At these levels May 12 London feed wheat is little more than a EUR3.00/tonne discount to Paris milling wheat.

European wheat as a whole remains too expensive on the international stage. Egypt bought 115,000 MT of US wheat in a tender today at USD259.75/tonne plus freight, that was more than USD30.00/tonne cheaper than French wheat. The freight differential between shipment from the US and France is currently only around USD10.00/tonne.

Further highlighting Europe's lack of a competitive edge is news that Brussels issued soft wheat export licences to the tune of 251 TMT this past week, bringing the marketing year-to-date total to 10.7 MMT - 5 MMT, or 32%, behind last season's pace 40 weeks into the campaign.

London wheat's strength on the day was all the more mystifying given that the pound closed at 1.2125 against the euro, it's best closing level on the weekly chart since August 2010.

The US winter wheat harvest will soon be upon us in southern States, Informa Economics estimated production at 1.631 billion bushels this week (44.4 MMT) - up 9.2% on last year.

Meanwhile harvesting in Pakistan is already underway and India are expected to begin harvesting an all-time high record crop of their own next week. With plentiful carryover stocks left over from last year India sold wheat to Bangladesh this week.

Meanwhile, the continued firmness in the world soybean market saw Paris rapeseed close the week at EUR504.00/tonne, up EUR13.75/tonne on the week and the highest closing price for a front month in 14 months.

Opinions as to how much damage has been done to the 2012/13 EU-27 rapeseed crop vary quite widely. The EU Commission currently forecast output in the coming year at 20.4 MMT, 1.1 MMT up on 2011/12. Coceral are less optimistic forecasting a crop of 19.1 MMT, Copa Cogenca are even more bearish giving us a figure of just 18.3 MMT.

Whichever way you look at it production looks likely to be well below usage, which the Commission peg at 22.9 MMT.