EU Wheat Falls On Bearish USDA Report

Posted by Nogger - a legend in his own mind at 19:21 | Categorized as

11/12/12 -- EU grains closed lower after a bearish, at least for wheat, USDA report. Jan 13 London wheat closed GBP0.25/tonne lower at GBP221.50/tonne, with benchmark May 13 down GBP1.70/tonne at GBP224.00/tonne and new crop Nov 13 falling GBP2.25/tonne to GBP195.00/tonne. Jan 13 Paris wheat ended EUR4.25/tonne easier at EUR261.75/tonne. For Paris wheat this was the lowest close for a front month in almost 8 weeks.

The USDA basically surprised the market by coming out with a world wheat production increase of 3.7 MMT in 2012, resulting in an ending stocks increase of 2.8 MMT to 177 MMT, versus trade expectations of a decrease of 750 TMT to 173.4 MMT.

They upped this year's Australian wheat production estimate by 1 MMT to 22 MMT and left Argentina's unchanged at 11.5 MMT. The latter, if not the former, was certainly a surprise.

For soybeans the USDA numbers were a little bullish, whilst they were neutral for corn. The trade now needs time to assimilate how accurate these figures are. The answer is maybe not very.

In other news, Russia said that it had sold 63,800 MT of intervention wheat this week, bringing the total volume sold since such sales began on Oct 23 to 884 TMT.

They also announced that total grain exports for the marketing year to date are 12.1 MMT (to Dec 10), down 24% on last year's 16.0 MMT. Full season exports are pegged at 15.5 MMT, down 43% on last year's 27.2 MMT, according to the Ministry.

Now that the USDA figures are out of the way the market may begin to refocus on world supply and demand for the early part of 2013.

On the wheat supply side, things could quickly soon start to get considerably tighter. Demand meanwhile isn't seen shrinking any time soon.

That possibly augurs well for prices in Q1 of 2013, especially with the supply side of the coin likely to switch to the US whilst winter wheat production prospects there decline.

However, the market is the market. As ever, money outflows can always over-ride market fundamentals, and what may spark those are sometimes not easy to predict.