London Wheat Sharply Lower On The Week As Pound Recovers
For the week as a whole May 13 London wheat crashed GBP7.35/tonne, and new crop Nov 13 fell GBP6.75/tonne. Mar 13 Paris wheat declined EUR2.75/tonne.
The pound rebounded above 1.18 from a torrid time last week that saw it close at a 16-month low of 1.15 against the euro last Friday, after ECB chief Mario Draghi said that recent euro strength could post a threat to the inflation outlook and hamper the recovery on the continent, increasing expectations of an interest rate cut.
That helped Paris wheat relative to London. The latter was also under pressure from imported wheat pouring into the country, something that a weak pound doesn't of course favour.
The long awaited Feb USDA WASDE report came out too late in the day to influence European markets too much, being issued at it's new time slot of 17.00 GMT. Trade was understandably quiet ahead of the news, although wheat did manage to put in a little rally in mid-afternoon trade when US futures turned higher.
Unconfirmed rumours circulate of US wheat trading into all sorts of unusual destinations - even the UK. Yesterday's US weekly export sales report however mentioned none of this, coming up with old crop sales of only 290,800 MT versus the 431,000 MT average that was needed to hit the USDA's target of full season exports of 29.5 MMT.
Defra/the HGCA said that 26.5% of the wheat used by UK flour, starch and ethanol processors in December was imported, up from normal levels of around 10-11% and the largest percentage since 1993/94.
A total of 593 TMT of wheat was milled in December, up 9.4% on a year previously. Wheat usage in retail feedstuffs fell 7.1% to 276.5 MMT as manufacturers switched into cheaper raw materials like barley (usage up 47.5%) and wheatfeed (up 24.7%).
FranceAgriMer said that winter wheat plantings there are up 2.3% to 4.97 million hectares and winter barley plantings are up 12.4% to 1.1 million hectares.
Tunisia bought 92 TMT of optional origin soft wheat and 75 TMT of barley optional origin for March shipment yesterday. France could well be the most likely supplier of the wheat, their exports to the end of December were 7.73 MMT, down 12% on year ago levels. Even so EU wheat exports as a whole are still raging ahead.
Various wires are also reporting US wheat allegedly sold into Russia. One report yesterday said that the Russian government themselves are considering imports with intervention stocks there set to fall to 300,000 MT by the end of the season, versus 5 MMT a year previously. Agritel report domestic Russian wheat prices of USD390/tonne, so it certainly could be possible, particularly in he last quarter of the season now that they have agreed to temporarily lift the 5% import duty on grains.
India's Farm Ministry forecast a wheat crop there of 92.3 MMT this year, down on their figure of 94.9 MMT for production in 2012, but well above consumption levels. They remain an aggressive exporter.
In the US, the promised chance of some decent rains for parched winter wheat areas seems to be fizzling away. "Key wheat states Kansas, Oklahoma and Texas continued dry this week, despite a forecast that looked hopeful for very generous precipitation. The longer dry weather continues, the greater the risk for a very poor wheat harvest. These 3 bread-wheat states make up 43 percent of US winter wheat. When Nebraska, South Dakota and Colorado are included, wheat farms there are also very dry, the “at risk” wheat increases to 58% of United States winter wheat," said Martell Crop Projections.
A mid-winter report on wheat conditions indicated Kansas and Oklahoma wheat in dire straits from drought. Kansas wheat was rated 39% poor-very poor, Oklahoma wheat had 69% in the bottom two categories -these are the United States top 2 wheat states," they added.
