Paris Wheat Ends At 4-Month Low

13/12/12 -- EU grains closed mostly lower with Jan 13 London wheat down GBP5.25/tonne at GBP215.25/tonne, May 13 also down GBP5.25/tonne to GBP217.75/tonne and new crop Nov 13 GBP4.15/tonne easier at GBP189.75/tonne. Jan 13 Paris milling wheat fell EUR5.50/tonne to close at EUR255.75/tonne.

This was a 4-month closing low for a front month on Paris wheat.

We have an interesting scenario developing between a very tight 2012/13 supply and demand equation in Europe against a more liberal one for 2013/14.

French analysts Strategie Grains today raised their estimate on EU soft wheat exports for the current season by 1 MMT from last month to 18.8 MMT (and versus 16.6 MMT in 2011/12 according to the USDA).

Citing strong demand from Iran and reduced competition from Argentina they said that there was "absolutely no room for EU wheat to attract any additional demand."

Trade gossip suggests that both the Rosario and Buenos Aires Grain Exchanges will cut their Argentine wheat production estimates to below 10 MMT today/tomorrow, contrary to the USDA holding their output forecast unchanged at 11.5 MMT on Tuesday.

MDA CropCast reduced their Argentine wheat crop estimate by 660 TMT today to 9.98 MMT "due to continued wetness."

In their first look into 2013/14 however Strategie Grains forecast EU-27 soft wheat production rising 9% to 134.2 MMT and that of durum wheat increasing 4% to 8.3 MMT. That would give Europe an all wheat crop of 142.5 MMT next year (versus the USDA's forecast for 2012 of 131.7 MMT), assuming a return to trendline yields.

Corn production is seen doing even better, witrh output up 16% to 63.0 MMT, albeit from a sharply reduced 2012 crop.

In other news Brussels issued 583 TMT of soft wheat export licenses this week, bringing the marketing year-to-date total to 8.56 MMT, a 24.4% increase on last year. This percentage has been increasing dramatically in recent weeks. At the beginning of November exports were only 6% up on last season.

Another interesting development to emerge this week is news that the Abengoa facility in Rotterdam, which produces bioethanol from corn and churns out DDGS as a by product, is to "voluntarily" close for three months.