EU Wheat Begins Week On The Offensive

Posted by Nogger - a legend in his own mind at 17:59 | Categorized as

21/01/13 -- EU grains closed firmer with Jan 13 London wheat up GBP2.65/tonne to GBP214.25/tonne, May 13 up GBP2.65/tonne at GBP217.65/tonne and new crop Nov 13 GBP2.20/tonne firmer to GBP190.75/tonne. Front month Mar 13 Paris milling wheat rose EUR3.50/tonne to close at EUR251.50/tonne.

With the US market closed for the Martin Luther King holiday, unlike the snow, fresh news was relatively thin on the ground.

Nevertheless wheat began the week on the offensive, buoyed by continued concerns over the prospects for US winter wheat production.

US wheat went into winter dormancy in the worst condition on record, and things have got progressively worse since then.

Weather maps show drier to much drier than normal conditions over the last 90-days across major wheat producing areas in Kansas and Oklahoma. The 14-day forecast continues to show little in the way of moisture relief for these areas.

Russia's grain exports are down 27% year-on-year, to 13.2 MMT as of Jan 9th, according to the Ministry. Even so, domestic Russian wheat prices continue to rise to fresh all-time highs following last year's drought. It is now said to be cheaper to import French wheat to St Petersburg than transport what little grain traders have left for sale in from the Russian interior.

There's some trade chatter that Russia may take the unusual step of cancelling import taxes on wheat as a precursor to allowing such a measure, although it would seem that an under the counter deal with Kazakhstan is more likely.

Kazakhstan's domestic grain stocks are also falling though, after drought cut their 2012 harvest by more than half. The FAO estimate that will cut their 2012/13 exports by 36% to around 7.3 MMT.

Tunisia are tendering for 50 TMT of milling wheat and 75 TMT of durum wheat, both of optional origin, although Europe is likely to be the most likely source. With EU-27 exports already running 35% ahead of last year's levels, and rising at a rapid rate, more foreign sales are not what is needed.

Just as Russia may now be ruing being so aggressive with it's sales campaign in the first half of the season, will Europe find itself regretting doing likewise in the second half?