EU Wheat Mixed To Start The Week

15/10/12 -- EU grains recovered somewhat from a lower across the board opening to closed mixed with Nov 12 London wheat down GBP0.65/tonne to GBP199.00/tonne and with Nov 12 Paris wheat up EUR0.25/tonne to EUR259.00/tonne.

EU wheat followed US markets lower in the morning, despite some bullish fundamentals. Defra for once concurred pretty closely with last week's forecasts from the NFU pegging the UK wheat crop 13% down at 13.3 MMT, with yields averaging only 6.7 MT/ha - a 14% decrease on last season.

The UK OSR crop was forecast 7% below last season's record at 2.6 MMT, with yields averaging 3.4 MT/ha. Both these numbers were a little below the NFU's estimates of 2.76 MMT and 3.6 MT/ha.

Defra placed the UK barley crop 0.6% higher than in 2011 at 5.5 MMT with yields at 5.5 MT/ha.

"Wheat production was the hardest hit...yields have been affected by the poor weather this year which led to high levels of disease during spring and summer along with low sunlight levels during the grainfill period," they said.

Defra's estimate is 0.7 MMT below last week's USDA forecast, which also trimmed 0.5 MMT off French production this year to 38.5 MMT and placed full EU-27 output at 131.58 MMT, which is 5.7 MMT down on last year.

On the weather front: "Rains increased across northwestern and southeastern Europe over the weekend, improving conditions for winter crop germination and establishment. Rains in UK will maintain some wetness concerns, however. The rains may also lead to some wetness in northwestern France," say MDA CropCast.

In France the corn harvest is only 16% complete versus 55% this time last year, as the wet weather disrupts harvesting. Winter plantings are also lagging at 14% complete versus 29% a year ago.

Ukraine's grain harvest is 87% complete at 37.6 MMT. The corn harvest is 62% through producing a crop of 11.4 MMT to date.

CONAB estimate the Brazilian wheat crop at 5.0 MMT this year, in line with the latest USDA forecast and 13-14% down on last year. The top two wheat states in Brazil are Parana, where harvesting is already 60% complete, and Rio Grande do Sul where it is just getting underway. Plantings in the former were down 27% this year due to second crop corn offering potentially more lucrative returns. Brazil has a domestic consumption of around 11 MMT of wheat per annum and will probably import around 7 MMT in 2012/13.

Goldman Sachs are apparently forecasting Chicago wheat prices to reach USD10.25/bushel by the end of the year, around 20% higher than were prices currently stand. The USDA have over estimated production in the southern hemisphere this year they say, placing the Australian wheat crop at 21 MMT (versus 23 MMT from the USDA) and the Argentine crop at 10.8 MMT (versus 11.5 MMT).

Whilst Black Sea wheat has dominated most of the first half of the 2012/13 export season, EU wheat should come into its own in the second half of the marketing year, having a distinct geographical advantage into the North African and Middle East markets.

Much of Argentina's exportable surplus will probably end up in Brazil, with Australia and Canada competing with the US into Asia. Dark horse India may continue to ensure that these traditional wheat exporting nations don't have things all their own way however.