London Wheat Crashes To Near 5-Month Low
06/03/13 -- EU wheat futures closed sharply lower, dragged down by Chicago wheat collapsing to new 8-month lows in overnight trade on the outlook for bumper world production in 2013. Origin Enterprises said that around 20% of the planned UK winter wheat area never got sown, along with 10% of winter OSR, according to Agrimoney.com. That's in line with other estimates around. The big unknown at the moment is what percentage of the crops that did get planted will/have been written off to be resown with spring crops. Whilst that is clearly of extreme local importance the bigger picture appears to be pointing to increased output of grains and oilseeds elsewhere around the world this year.
On the day London wheat closed with front month Mar 13 down GBP3.95/tonne to GBP197.80/tonne for the lowest close for a front month since mid-October, and with new crop Nov 13 also GBP3.95/tonne easier at GBP180.70/tonne. Mar 13 Paris wheat was down EUR5.00/tonne at EUR241.25/tonne.
Yesterday's bearish production estimates for 2013/14 from ABARES, in their first glimpse into prospects for the season ahead, hang over the market. With those numbers still ringing in traders' ears the USDA's chief economist, Joe Glauber, picked a bad time (or a good one, depending on your viewpoint) to say that world wheat output "could climb to record highs" in 2013/14 due to improved crop prospects for several key producers that were hit by severe drought in 2012.
India's state-run PEC only picked up a best bid in a tender to sell 175 TMT of wheat ex the west coast port of Kandla for Mar 15-Apr 30 shipment of just under USD297/tonne. Up until now they've been rejecting bids around the USD300/tonne mark and holding out for closer to USD305/tonne. It remains to be seen what they do this time as they are said to be looking to allow an extra 5 MMT of wheat to be exported over the next couple of months as they attempt to clear old crop stocks for harvest. Government stocks are nearly 4 times the official target set by the Ministry and harvesting of new crop begins at the end of the month.
Jordan only bought half of the 100 TMT of optional origin wheat that it tendered for today. There's been no official confirmation of how a Syrian tender that expired on Monday went yet.
Russia sold 61,063 MT of intervention grain in it's second sale of the week, bringing the total sold so far to 2.19 MMT. They exported only 308 TMT of grains in February, of which 117 TMT was wheat and 147 TMT corn, bringing their 2012/13 marketing year shipments so far to 13.85 MMT, which is 30% down on last year. There's talk now that there may be very little left to go and that the Ministry may revise their full season forecast down to 14 MMT from the existing 15.5 MMT.
Ukraine on the other hand seem to keep finding a little bit more. Grain exports there are currently 39% up on last year and comfortably outstrip Russia's at 18 MMT. That total includes 6.2 MMT of wheat and there is now talk of the Ministry possibly authorising a further 500 TMT of wheat for export this season as confidence is high for a bumper crop in 2013.
There's also a growing feeling that the worst might be over for US wheat too. Satellite imagery firm Lanworth Inc were said to have increased their forecast for US wheat production this year from 1.91 billion bushels to 2.026 billion (from 52 MMT to 55.14 MMT), presumably on the back of recent weather improvements.
Whilst recent snow storms have calmed trade fears over US winter wheat production, North Dakota, the top spring wheat state, reports snow depth between 12 and 20 inches. If this moisture all soaks in it would go a long way toward resolving drought in the region too ahead of planting which typically begins next month, say Martell Crop Projections.
Reports suggest that wheat crops in Tunisia and Algeria are beginning to head, with harvesting in the Middle East/North Africa set to start in April. Weekend rains "maintained abundant moisture across northern Morocco, northern Algeria, and northern Tunisia. Some dryness lingers in west central Morocco, but active rains there over the next two days will help to ease dryness and improve crop conditions," according to MDA CropCast yesterday.
The Spanish Ministry said that the winter wheat area there (excluding durum) is up 2.2% to 1.8 million hectares this year. Both the durum and winter barley area is virtually unchanged on a year ago. Spain has had an unusually wet February and is forecast to get plenty more in the next 14 days.
The USDA are due to release their March world supply and demand numbers on Friday night London time. Few seem to want to be long of wheat heading into that. In the mood that the market is currently in, a bearish slant to that would probably be viewed as very bearish, whereas a bullish one might only be viewed as mildly supportive.
We're not entirely out of the woods yet though. US winter wheat on the SW Plains could be abruptly dragged out of dormancy by temperatures forecast to get into the 70's on Thursday, that might not be too beneficial for wheat in areas that didn't get last week's snows, say DTN. Meanwhile temperatures are forecast to plunge across northern and western Europe this weekend and last for at least fourteen days afterwards, according to the latest weather models. Germany and Poland could see temperatures fall 8-10 degrees below normal into the 20-25 °F range, with widespread frosts also on the cards for the UK and much of France too.
