EU Grains Slump On USDA Numbers

28/03/13 -- Activity in EU wheat futures was quiet for most of the day, awaiting input from the USDA via stocks and acreage estimates due late during European trade at 16.00 GMT. A very bearish USDA stocks number saw nearby Chicago corn futures collapse limit down, dragging everything else with it, including EU grains late in the session.

At the close London wheat closed with front month May 13 down GBP4.75/tonne at GBP199.25/tonne and with new crop Nov 13 GBP3.45/tonne easier to GBP185.80/tonne. May 13 Paris wheat was down EUR8.00/tonne to EUR238.75/tonne.

For the holiday shortened week that puts May 13 London wheat down GBP2.25/tonne versus last Friday, with Nov 13 up GBP0.10/tonne and May 13 Paris wheat down EUR2.50/tonne. Before the USDA came out London wheat was on target for the best close for a front month since mid-February.

On the face of it the USDA stock figures show that less corn and wheat was fed domestically in the Dec/Feb quarter than the trade anticipated. That would appear to be in direct conflict to their decision to increase domestic corn feed usage by 100 million bushels earlier in the month with the release of the March WASDE report.

Whilst there has been a lot of talk of feeders and ethanol plants in the US switching away from corn, if that was responsible for today's surprise then you'd have expected wheat stocks to come in lower than anticipated. They didn't, they were right at the top end of trade expectations too.

The has been a lot of talk of increased livestock liquidation in the US due to high feed prices, so maybe today's stocks numbers are a reflection of this? Only time will tell.

Fresh news was limited prior to the USDA statements, with European traders discussing mixed prospects for the 2013 harvest.

Concerns for crops in the UK and northern France are mounting as winter shows no sign of turning to spring just yet. "March 2013 was one of the coldest in recent years, and despite a dry period at the beginning, from mid-month there was a return to wet weather with an average of 58mm (up to 26 March)," say ADAS.

Spring cereals are only 15% planted on a national level, normally this would be 50% by the end of March, although there has been more progress on the lighter land in eastern counties where up to 60% of planned area has been drilled, they note.

Only around 70-75% of the planned winter wheat area was in by the end of November and the winter barley area is thought to be 10-25% down too, they say. "Late drilling, slugs, wet soils and latterly pigeons have resulted in a high failure rate in winter oilseed rape crops, with up to 20% expected to be replaced," they add.

There are worries over crop conditions, particularly for rapeseed, in France too. This had seen front month May 13 Paris rapeseed rally to an intra-day high of EUR487.75/tonne, for a rise of more than 6% in less than a fortnight, with it's sights set on closing higher tonight for the eighth session in a row. Those plans went up in smoke following the USDA numbers, with the market settling EUR5.50/tonne lower at EUR477.25/tonne at the close.

"Despite the industry expectation that the UK spring barley area would surge in 2013 following a drop in winter plantings, the European barley area is expected to be lower. Coceral estimates the total EU-28 barley area in 2013 at 12.226 million ha – a 10% fall on 2012," say the HGCA. This could provide a welcome boost for spring barley demand, should spring ever get here.

In the US there's been support for the wheat market earlier this week following three nights of freezing temperatures, although Martell Crop Projections say that winter wheat there isn't generally mature enough to suffer serious damage. "Another cold wave is predicted Monday night, April 1. This would not be a 'frost' but a hard freeze in Kansas, northern Oklahoma and the Texas panhandle. Lows in the 20s F are predicted. When a hard freeze occurs in the flowering stage, wheat damage is severe and irreversible. Kansas wheat development is not far enough along (still jointing) for severe damage to occur," they say.

Elsewhere in the US, much like Europe, things are also running late. "Northern cold and a heavy snow-pack threatens spring wheat planting. North Dakota producers anticipate a delayed planting campaign from a thick snow pack and delayed melting. The average snow depth March 25 was 12 inches, compared to no snow at all in 2012 on the same date. Growers do not expect to begin fieldwork until April 22, and planting is only anticipated to begin May 10. Ordinarily wheat seeding begins in late April," they add.