EU Wheat Generally A Little Lower, Although Export Pace Remains Robust

31/01/13 -- EU wheat futures closed mixed with Mar 13 down GBP1.10/tonne at GBP212.30/tonne, benchmark May 13 also down GBP1.10/tonne at GBP214.25/tonne and new crop Nov 13 GBP0.45/tonne higher at GBP190.55/tonne. Mar 13 Paris wheat was EUR0.25/tonne lower at EUR247.75/tonne.

The market was generally a little lower, in sympathy with weaker Chicago wheat today, although the old crop availability situation continues to tighten. That said, US weekly export sales of less than 300 TMT of old crop were relatively tepid, and now need to be around 490 TMT for each remaining week to reach the USDA's target for the current marketing year.

Despite US wheat being amongst the most competitively price in the world (currently around USD25/tonne cheaper than EU and Australian wheat) they still don't seem to be picking up as many sales so far in 2013 as many players in the market expected. That is even though Russian wheat is at all time highs (around EUR280/tonne) and Chinese wheat is even more expensive at around EUR300/tonne.

There's talk of US wheat coming into Europe now under the reduced tariff quota system, but there's no official confirmation of it yet. There was in fact a cancellation of 9 TMT of wheat to the UK in amongst today's USDA data. Meanwhile Brussels announced that it had issued 467,079 MT of soft wheat export licenses this past week, bringing the marketing year-to-date total to an impressive 11.3 MMT. Weekly exports only need to be around 200 TMT to hit current export targets, and even that level is forecast to leave ending stocks at the lowest level since before the EU-27 became the EU-27.

Incidentally, most analyst's forecasts for European grain production in 2013/14 are now for the EU-28 with Croatia set to join the bloc in the summer. With an annual wheat crop of less than 1 MMT and consumption of around 600 TMT that won't make too much difference to the overall European supply and demand picture.

MDA CropCast today forecast EU-28 winter wheat production at 132.04 MMT in 2013/14, with OSR output at 18.49 MMT and the barley crop here at 52.9 MMT. All those estimates are unchanged on a week ago.

South Korea bought 55 TMT of non-GM corn from the EU overnight for May shipment, they were also said to have purchased 110 TMT of Indian wheat for May shipment. India keeps picking up sales, although not all buyers are keen on their wheat due to mycotoxin issues. Iraq have issued a tender for 50 TMT of optional origin wheat, although they frequently buy more. Ethiopia are also looking for 35 TMT of optional origin wheat.

The main weather issues grabbing the market's attention continue to be ongoing drought on the US Plains, and how that may impact upon wheat production there in 2013. "Rains returned to southeastern Kansas and northeastern Oklahoma this past week, which helped to improve moisture there slightly. However, precipitation amounts were rather light across the rest of the Plains, allowing significant drought conditions to persist," said MDA CropCast.

A more immediate issue is the daily forecasts coming out of South America, and how that may affect corn and soybean output in Brazil and Argentina. "Rains remain abundant in northern Brazil, which are slowing first crop corn drydown and harvesting. The continued lack of notable rains in Argentina is allowing dryness to persist in western areas, but moisture needs are declining for corn," they add.