EU Wheat Slide Continues, Dragged Down By US Market

25/02/13 -– EU grains closed mostly lower with London wheat partially  supported by the weak pound - and Paris wheat generally three to four euros lower. Sterling fell to it's lowest level against the euro since October 2011, and it's worst versus the US dollar since July 2010, following Friday's Moody's credit rating downgrade. With the minutes of the Bank of England's February MPC meeting already revealing a 6-3 split on whether to increase QE last week the pressure to resume it will now intensify.

US wheat futures slid to an 8-month low on an improved weather outlook for US winter wheat, ultimately dragging European grains down with it.

On the day London wheat closed with front month Mar 13 down GBP0.95/tonne at GBP202.60/tonne and new crop Nov 13 GBP0.70/tonne lower at GBP185.45/tonne. Mar 13 Paris wheat was EUR3.25/tonne easier at EUR239.75/tonne.

The EU Commission's MARS unit said that "to date, no frost-kill damage has been simulated for the EU-27 in 2013," adding that "no frost kill damages are expected, as based on our simulations," on weather models through to early March.

"The warm-spells recorded to date have been long and strong enough to initiate a dehardening of winter crops in northern France, western Germany, Austria, southern Hungary and Balkan Peninsula just as in significant areas around the Black Sea," they noted.

Next month they will give their first indications on yield potential in Europe for the 2013 harvest.

US weather continues to improve chances for winter wheat areas there with another massive snow storm making its way across Oklahoma, Kansas, and southern Nebraska this morning.

"The new winter snow storm, the second in a week, is expected to bring an additional 0.25 to 1 inch of moisture from snow melt in Kansas, Oklahoma and West Texas," said Martell Crop Projections.

"Drought is rapidly resolving from back-to-back snow storms. Moisture deficits had accrued to 2 inches in Kansas and 3.6 inches in Oklahoma, the top 2 US winter wheat states in the long period back to early October. Very heavy precipitation last week cut the Kansas moisture deficit in half. Additional heavy moisture in the new snow storm would may create a soil moisture surplus. Oklahoma October-February drought was more severe, though cumulative moisture from the 2 storms may shrink the deficit to within 1-1.25 inch," they added.

In Argentina "Weekend rainfall was near expectations. Scattered showers occurred in southern and central Cordoba, Entre Rios, central and southern Santa Fe, Buenos Aires, and far eastern La Pampa. Amounts were 0.25 to 1.0” locally up to 1.75” with 70% coverage," say MDA CropCast.

The weekly Commitments of Traders Futures and Options report released Friday night continues to show fund money dumping corn longs and building on their existing large short in wheat.

That offers the potential for a sudden rebound in Chicago wheat values from the 8-month lows to which they have slumped today - if something bullish comes along to spook them into short-covering. For US wheat though the seasonal chart suggests that it's often May/June before the lows of the year are set.

Ukraine said that they'd exported just 133,500 MT of wheat in the first three weeks of the month versus over 1 MMT of corn as wheat shipments grind to a halt. Total 2012/13 exports currently stand at 17.32 MMT, up 38% on last season, of which 6.3 MMT is wheat, 8.9 MMT corn and nearly 2.0 MMT barley.