EU Wheat Rises On Improved Demand

20/03/13 -- EU wheat futures bounced higher, supported by the news that Algeria had bought 350 TMT of optional origin milling wheat in a tender for only 50 TMT. The French are frequently Algeria's pet supplier of choice. Jordan, Bangladesh and Iraq all have wheat export tenders pending, with German wheat possibly standing a chance with the former.

On the day, London wheat closed with front month Mar 13 up GBP3.25/tonne at GBP197.75/tonne and with new crop Nov 13 GBP0.85/tonne higher to GBP184.75/tonne. May 13 Paris wheat was up EUR4.47/tonne at EUR243.25/tonne.

Reuters reported at the weekend that cash-strapped Egypt only had 89 days of wheat supplies versus the six months worth that they would normally carry. They are said to be in talks with India to add them to their approved suppliers list. How times have changed from the not so long ago days of Egypt taking it's pick from sellers falling over themselves to conform to whatever criteria they so desired. Minimum 60,000 MT lots, only one port of loading etc, etc.

Potentially keeping a lid on this wheat rally however (US prices rose to a near one month high in overnight trade) are India. They've got a mountain of old crop wheat still left to sell and another deluge of new crop coming, with harvesting likely to start by the end of the month. They reportedly picked up a best bid of USD305.72 FOB from Toepfer in a tender to sell wheat today. That puts the price back up into the ballpark region that they have been targeting, having refused bids around the USD295/300 mark in recent weeks.

Ukraine are said to have agreed to raise the ceiling on their wheat exports for 2012/13 to 7 MMT. Exports have been stuck around the 6.2-6.3 MMT mark, but it would appear that the government are prepared to let a little bit more go now that they are confident in a good crop this summer.

Italy's 2012 soft wheat imports were 4.19 MMT, down almost 18% versus 5.1 MMT in 2011, say Bloomberg. Durum wheat imports fell nearly 32% to 1.54 MMT versus 2.26 MMT in 2011, they added.

US satellite analytical firm Lanworth Inc were said to have cut their forecast for US all wheat production this year from 2.026 billion bushels to 2.023 billion. That's 55 MMT in language we understand this side of the Pond, a drop of nearly 11% on output in 2012.

Crop conditions on the continent are more promising than they are at home. The HGCA say that in France "soil moisture levels are seen to be largely adequate. The cold weather has resulted in slow growth for wheat and rapeseed but the temperatures later this week should be beneficial."

Good snow cover in Poland and Germany should keep crop damage from the current cold snap to a minimum, whist Spain has seen favourable rains and "the cold weather has slowed wheat growth but beneficial temperatures will moderate this in the next few days," they add.

Back across the Pond, despite today being the vernal equinox, when daylight hours exactly match the number of darkness hours, the forecast in Canada and Northern United States remains unseasonably cold, say Martell Crop Projections. "The message is that no important melting is predicted over the next several days in the Northern Midwest corn belt and North Dakota spring wheat growing areas," they add.

The pound had a yo-yo day. News that the BoE's MPC voted 6-3 in favour of keeping QE unchanged this month gave the pound a little boost in the morning, followed by a period of predictable volatility as Chancellor George Osborne delivered his budget speech. Heading into the close it was trading back up near the highs of the day against both the dollar and the euro though.

Monday's nerves over Cyprus seem to have calmed a little, with it appearing that maybe Russia were going to step in and lend a helping (and self-interested) hand. However this looks far from a done deal at the moment. Reuters suggest that the Cypriots want to renegotiate a 5-year extension to an existing EUR2.5 billion loan that expires in 2016, as well as lowering the interest rate from the current 4.5%. In addition to that they wish to borrow a further EUR5 billion from the Russians.