EU Wheat Down Again, Extending Recent Declines
03/10/12 -- EU grains lower with Nov 12 London wheat down GBP0.50/tonne to GBP199.50/tonne and Nov 12 Paris wheat falling EUR1.25/tonne to EUR258.00/tonne. European wheat extended the recent declines, although closing off the intra day lows in a fairly quiet session with Germany closed for a public holiday. This was London wheat's sixth lower close in seven trading sessions.
Outside influences were bearish, with crude oil crashing around USD3/barrel in afternoon trade on global economic concerns. Media reports suggest that Spain may have it's Moody's credit rating downgraded to junk status by the end of the week.
As ever, wider macro-economic concerns always seem to trump the grain market fundamentals.
The trade is still coming to terms with the extent of the acute decline in UK wheat production and quality this year. A crop below 14 MMT now looks assured - the lowest since 2007. However bushel weights are so low that it looks likely that we may well end up importing more than double last season's 900 TMT of wheat in 2012/13.
Meanwhile exports are also likely to take a severe hit compared to the 2.5 MMT shipped out in 2011/12. It may therefore surprisingly be the case that in a very low production year we actually struggle to move the bulk of the low quality wheat that we have.
Coceral place the EU-27 wheat crop at 124.7 MMT, down 3.6% on last year. The French crop is seen 6% higher at 36.05 MMT. That is one of the few success stories however, with the UK crop forecast down almost 11% at 13.6 MMT. Production in Spain, the Czech Republic, Poland and Romania has also taken a fair hit this year.
The EU-27 rapeseed crop is forecast at 19.3 MMT, a modest increase on last season's 19.05 MMT, led by a rebound in production of 29% in Germany to 5.03 MMT.
Wheat output in New South Wales, Australia's second largest producing state, is now seen around 1 MMT down on last year at 6.9 MMT. Production in the top state Down Under of Western Australia, where the wheat harvest is now just about underway, is also seen sharply lower on persistent drought.
Egypt bought 240,000 MT of wheat from France and Argentina for mid-December delivery today. Three cargoes of French wheat came in at an average of USD344.37/tonne FOB, with one cargo of Argentine wheat trading at USD333.68/tonne FOB.
US wheat was a cheapest priced USD346.91/tonne whilst Russian, Ukraine and Romanian wheat (who have all won a share of Egypt's recent business) weren't even offered on this occasion.
