EU Wheat Falls - Friday's Gains Seen Overdone

04/02/13 – EU grains closed mostly lower with Mar 12 London wheat down GBP1.90/tonne to GBP212.50/tonne, benchmark May 13 also GBP1.90/tonne lower at GBP214.50/tonne and new crop Nov 13 down GBP3.00/tonne to GBP190.00/tonne. Mar 13 Paris wheat fell EUR1.00/tonne to EUR247.50/tonne.

Friday's relatively strong EU wheat closes could maybe be considered a bit false. EU wheat therefore seemed to spend most of the day re-adjusting to a US market that closed around 14-15 cents lower on Friday night, and even allowing for this morning's gains of 4-5 cents, still means a net decline of 10 cents over the two sessions.

Weekend rains in Argentina were not as good as was hoped for. MDA CropCast said "the rains resulted in only slight improvements in moisture in these areas, and drier weather across all of the region this week will allow moisture shortages to quickly increase once again. Temperatures will also begin to warm again in southwestern areas."

The market seems relatively content to worry about the miserable state of US winter wheat a bit closer to harvest time, at least for now. Exports, or rather the lack of them are the problem for the bulls looking for higher prices.

Egypt bought one cargo of US wheat in their weekend tender, which doesn't amount to much of a game-changer. India has a whopping 710,000 MT of wheat up for export to start the week and is already selling new crop too. Egypt won't buy it but there are plenty who will, which may limit the upside in wheat for now.

At least the outlook for mild temperatures across the Plains and Delta this week will keep winterkill threats low for wheat. "Wheat will likely begin to green up again across the central and southern Delta as well as the far southeastern Plains. Showers in the Delta and far southeastern Plains will improve moisture slightly, while dryness will remain extensive in the central and western Plains. Additional improvements in moisture are expected in the southern Midwest, Delta, and southeastern Plains in the 6-10 day period," MDA CropCast forecast.

This outlook for warmer weather ahead is echoed by Martell Crop Projections. "The Great Plains forecast calls for strong warming in the week ahead. Tropical air from Mexico would stream up into the Great Plains raising temperatures into the 60s F Wednesday-Thursday, and 10-15 degrees above average. Strong drying would occur on the High Plains with gusty winds and no important rainfall," they say.

After taking a battering last week, the pound consolidated against a euro itself under renewed pressure on heightened concerns over Spain and their worsening employment crisis. That probably led to London wheat coming off worse than Paris today.

IKAR said Russia has exported 14 MMT of grains so far this season, including 10 MMT of wheat. The Ukraine Ministry say that they have exported 16.25 MMT of grains so far this season, including 7.95 MMT of corn and 6.04 MMT of wheat.

Russia are said to be reviewing whether they will waive the existing 5% import duty on grains until the 2013 harvest with an answer expected this week. If they do that could add a bit of support to the market, although it may be that Kazakhstan is likely to be the main beneficiary.