EU Wheat Lower Despite Russian Import Duty Waiver

06/02/13 -- EU wheat futures closed mixed but lower with Mar 13 London wheat down GBP1.50/tonne to GBP210.50/tonne, benchmark May 13 falling GBP1.50/tonne to GBP212.50/tonne and new crop Nov 13 GBP1.45/tonne weaker at GBP188.30/tonne. Mar 13 Paris wheat fell EUR0.25/tonne to EUR246.00/tonne.

Confirmation that Russia had decided to remove it's 5% import duty on grains only made minor ripples when it was revealed that the action could take until April to implement and that the volumes concerned weren't likely to be very large. Most of what they require will continue to come via an existing duty-free agreement in place with neighbouring Kazakhstan it would seem.

The Russians sold another 60 TMT of their intervention stocks today, in their second tender of the week. That brings the total volume sold so far to 1.684 MMT. They've authorised the release of government-owned intervention stocks at the rate of around 130 TMT/week for the remainder of the season, which should effectively clear them out by harvest time. Total grain stocks at the end of the season are estimated at 7.7 MMT, including those held in commercial and private hands, which is far less than the 19 MMT left over at the end of 2011/12.

Even so, it looks like Russia may just scrape through to the next marketing year with only minimal imports. Production potential for 2013/14 will obviously want monitoring closely.

Ukraine said that it has exported 16.5 MMT of grains to the end of January, with the Ministry cutting their full season export forecast from 23.2 MMT to 21.0 MMT. January exports were 1.9 MMT, of which only 175,500 MT was wheat, with the vast majority of what is left to ship now being corn (accounting for 1.5 MMT of exports last month).

In Europe "Winter weather conditions have vacillated from unseasonably warm to cold calling into question the hardiness of winter grains. Nueremburg, Germany, recorded a 29 degree F temperature swing, from 51 F Christmas Eve to 22 F four weeks later in mid January," say Martell Crop Projections.

"Winter temperatures have been mostly moderate in the 3 top winter wheat producing countries France, Germany and United Kingdom. As long as bitterly cold weather does not develop (that would be zero F), winter grains should be safe from freeze damage. The bigger worry may be is persistently wet field conditions in winter wheat in United Kingdom and northern France," they add.

Agritel also noted that excessive wetness in many parts of France is a problem for winter wheat and rapeseed.

In the US the updated forecast is suddenly drier in hard red winter wheat areas. "The High Plains would receive spotty and light rain, at best, while central Kansas and Oklahoma get .10 to .50 inch rains. This is a major change from yesterday’s forecast that was very wet in the top 2 wheat states Kansas and Oklahoma. Springlike temperatures occurred yesterday in Southern Plains wheat, with low-mid 60s F, as warm and dry air streamed northward out of the Mexico desert. Perhaps there will be another rain event next week. The 6-10 forecast gives the Great Plains a 40-50% chance of showers, not terribly promising for drought relief," report Martell Crop Projections.

Following their own disappointing crop, and similar problems in neighbouring Argentina, the Brazilian government announced that they would exempt 1 MMT of wheat from outside of the Mercosur trade block from import tariffs between April and July.

The trade remains locked into a cautious mode ahead of Friday's USDA WASDE report. As far as wheat goes the trade is expecting maybe reduced export potential from the US, although that could at least partially be balanced by increased feed usage. Ending stocks there are forecast to rise, but only slightly, to around 728 million bushels (19.8 MMT from 19.5 MMT last month). World ending stocks are expected to fall from 176.64 MMT to 175.54 MMT, which would be 10% down on 2011/12 stocks of 195.78 MMT.

Syria announced a new tender for 100 TMT of wheat for March/May shipment. Black Sea origin was said to have won the business last time. The deadline for bids is March 4th so there's a good bit of time yet before we know the results of that tender.