EU Grains Higher - Led By London Wheat

20/08/12 -- EU grains are higher with Nov 12 London wheat up GBP1.75/tonne to GBP202.00/tonne and Nov 12 Paris wheat up a more modest EUR0.25/tonne to EUR263.00/tonne.

This is another new life of contract high for Nov 12 London wheat after weekend harvest activity continues to throw up highly variable, but generally disappointing results. Wheat yields half of normal, down to 2 MT/acre, were reported in Norfolk over the weekend, with quality similarly poor.

London wheat continues to lead the way higher on ideas that output this season may ultimately finish well below last year's 15.3 MMT, despite an increase in plantings, whist domestic demand will be boosted by the re-opening of Ensus and Vivergo also coming on stream before the end of the year.

Since the end of July front month Nov 12 London wheat is up 5%, with it's Paris counterpart only 2% higher and Sep 12 Chicago wheat around 1% lower.

It will be interesting to keep an eye on UK exports now that we are into the new 2012/13 marketing year. Shipments in June, the last month of 2011/12, were a six year low of just 55 TMT. With serious doubts over the quality of this year's crop reflected in large milling wheat premiums, UK wheat is simply not competitive to traditional export homes like Spain.

Feed wheat ex store Saxony for September collection was reportedly offered at EUR235.00/tonne on Friday - the equivalent of around GBP185.00/tonne. The premium for A quality 13% protein, 275 hagberg milling wheat over there is currently around EUR15.00/tonne as opposed to in excess of GBP30.00/tonne here in the UK.
SovEcon have cut their estimate for Russian wheat production again, to 39-41 MMT, from 40.5-42.5 MMT last week, as the harvest progresses into the Urals and Siberia with yields similarly disappointing to those further south and west.

That represents a 27-30% decrease on last season's output of 56.2 MMT, with an inevitable impact on exports also likely. Even so Russia's Ag Ministry have ruled out an export ban saying that other methods will be employed to contain rising domestic food prices.

The Ministry are still forecasting a total grain crop of 75-80 MMT. SovEcon now say that will be more like 71.0-72.5 MMT (from an earlier estimate of 70-74 MMT), whilst other local analytical group IKAR are predicting 73 MMT (down from 74.5 MMT previously). Production in 2011 was 94 MMT.

The Kazakhstan Ministry are reporting grain yields there down 37% from last season, although less than one million of the estimated 15 million hectares planted has been harvested so far. Carryover stocks from 2011/12 should still enable them to export 12 MMT of grains in 2012/13 despite production this year more than halving to around 13 MMT, they add.

The European debt crisis rumbles quietly on in the background, with signs of Germany getting to the end of their tether. German finance minister, Wolfgang Schäuble, said over the weekend that "we can help the Greeks, but we cannot responsibly throw money into a bottomless pit," according to a report in the FT.

Schäuble apparently went on to rule out a new aid plan for Greece, saying that "there are limits".