EU Wheat Posts Multi-Month Lows

12/02/13 – EU grains closed sharply lower with Mar 12 London wheat down GBP3.90/tonne to GBP201.10/tonne, benchmark May 13 also GBP3.90/tonne lower at GBP203.85/tonne and new crop Nov 13 down GBP2.55/tonne to GBP181.85/tonne. Mar 13 Paris wheat fell EUR4.50/tonne to EUR241.75/tonne.

For London wheat this was the lowest close for a front month since October, and for Paris wheat it was the worst since the early days of last July.

The market continues to decline as funds exit corn and soybean longs, and build shorts in wheat. The latter leaves the market vulnerable to an upside spike at some point as and when they get spooked by something, or bank enough profit, but when?

US weather is looking slightly more favourable. "The subtropical jet stream is producing hopes for rain and snowfall in United States hard red winter wheat this week. Waves of snow showers are predicted in the Texas panhandle and Oklahoma over the next few days, though the new forecast is distinctly drier than the one issued yesterday. The morning satellite view shows thick clouds developing over the Southern Great Plains," say Martell Crop Projections.

How much difference this will make for wheat that went into winter in the worst state on record, and has declined in condition appreciably since, only time will tell. "I remain negative on the chances for hard red winter wheat to recover fully from drought. Conditions were so dry to begin with last fall that soil profiles have become dry through a deep layer. It would take drenching rains to make a positive difference in hard red winter wheat yields," according to Martell Crop Projections.

US wheat exports have picked up a bit of late, but still by not enough to hit USDA targeted levels for the season. Yesterday's export inspections of 22.45 million bushels beat trade forecasts of 15-20 million, but still fell short of the required 26.3 million needed to match USDA forecasts for 2012/13.

The trade will be looking anxiously to see if Thursday's export sales report confirms any of the recently rumoured business with Russia, China, Brazil or the UK.

Algeria announced a new tender for 50 TMT of optional origin milling wheat for May shipment. France is their usual regualr supplier, although Europe is hardly scouring the market looking for new business with exports already 40% up on last season. The Ethiopian, Syrian, Iraqi and Jordanian wheat tenders are all still pending. South Korea was said to have bought 50 TMT of Indian feed wheat overnight for June shipment.

ABARES edged up their Australian 2012/13 wheat production estimate from 22.04 MMT to 22.08 MMT, reiterating a previous forecast for exports of 20.9 MMT (down 15% on the previous season's record 24.7 MMT). Rapeseed production was increased from 2.64 MMT in December to 3.09 MMT this time round. Barley output was also tweaked higher to 7.1 MMT from 6.9 MMT.

They won't release production forecasts for 2013/14 until next month, but placed the wheat planted area at 13.3 million ha, broadly unchanged from last year.

The French Farm Ministry estimated winter wheat plantings for the 2013 harvest at 4.98 million ha, an increase of 3.1% on 2012.

The USDA released baseline acreage and production estimates for 2013/14 yesterday, and pegged the US all wheat planted acreage at 57.5 million acres, up 3.2% versus 55.7 million in 2012. This would be the highest planted acreage since 2009/10.

Although all the popular newswires are carrying this story, these estimates are already old news as they were originally formulated in October/November for budget purposes. The USDA will update these numbers again at the Outlook Forum on February 21st and 22nd.