EU Grains Turnaround Following USDA Data

28/09/12 -- EU grains closed sharply higher with Nov 12 London wheat up GBP4.80/tonne at GBP202.75/tonne and Nov 12 Paris wheat up EUR7.75/tonne to EUR265.75/tonne.

For the week that still means that Nov 12 London wheat lost GBP3.65/tonne whilst Nov 12 Paris wheat gained EUR2.00/tonne.

Wheat was lower in early trade, but did a sharp about turn after the USDA's Sept 1st stocks report placed US corn inventories below one billion bushels at 988 million, the lowest end of marketing year stocks in eight years.

US wheat stocks were also estimated lower than anticipated at 2.1 billion bushels versus the expected 2.28 billion.

Paris wheat was also supported on the week, relative to London wheat, by a weak euro and a strong showing in this week's Egyptian tender.

The UK market is developing not just a two tier look, but a multi-tier look, with all sorts of low grade grain being offered around. Growers are frequently less than impressed with the kind of allowances that merchants and end-users have in mind for what would be considered "screenings" in any other year. "Do you know anyone who'd take 54kg bushel weight wheat?" I was asked today. My suggestion that he tried leaving it out for the binmen on Monday met with the response that he'd already tried that and they wouldn't take it.

Coceral revised their ideas on the UK wheat crop down to 13.6 MMT from 15.25 MMT previously, although it was all the way back in June that they came out with that estimate. Yields were pegged at 6.81 MT/ha, which ties in with the HGCA's 6.8-7.2 MT/ha, with the "expectation that the final value is towards the lower end of this range."

Coceral's number falls below recent estimates from Strategie Grains (14.0 MMT) and Toepfer (13.8 MMT), which on the face of it would seem bullish. It probably is, if you're one of the lucky few with 72kg/hl bushel weight wheat in the barn.

Exports are clearly going to take a very serious knock this season, and what sales are already on the books I imagine will have the sellers actively looking to wash them out, or switch to other countries of origin. Imports are also evidently going to be much higher than in a normal year too.

Separately the IGC cut 5 MMT off it's world wheat production and 2012/13 ending stocks estimates. They also trimmed global corn output by a similar amount, and too 2 MMT off this season's carryout total. Downward revisions for Russian and Australian wheat, together with EU wheat and corn were behind the revisions, they said.