EU Grains Dive Pressured By Outside Influences

15/04/13 -– The EU grains traders market closed lower, as fund money continues to pull out of the sector, and commodities in general. Both crude oil and gold were also down heavily, with the latter slumping to a 2-year low marking the worst 2 day drop for gold in 30 years. The last time gold fell over 10% in 2 days was Feb 1983. Worse than expected Chinese GDP data is one of the reasons being cited as being behind today's push lower. Bird flu, Cyprus and North Korea are amongst others.

London wheat closed with front month May 13 down GBP3.15/tonne at GBP194.60/tonne and new crop Nov 13 GBP3.05/tonne easier at GBP184.10/tonne. May 13 Paris wheat finished EUR3.50/tonne lower at EUR246.00/tonne.

China reported Q1 2013 GDP at 7.7%, down from 7.9% in the final quarter of last year and below market forecasts.

Data from the US shows fund money has spooked and slashed it's corn length by almost three quarters in the past fortnight, from 192,500 heading into the USDA's quarterly stocks report at the end of March, to less than 51.000 lots as of last Tuesday night, post the April WASDE report. Their overall net length in US agri commodities is now the smallest since at least 2006, say Agrimoney.

Faced with a mass exodus of that magnitude the futures market can only go one way.

The USDA today confirmed private exporters had sold 480 TMT of US SRW wheat to China, to add to the 360 TMT that was reported last week. This now gets us up the the kind of number that the Chinese were widely rumoured to have bought around a week ago. The question now is will there be any more to add to that?

The USDA will report after the close tonight on US winter wheat crop conditions and corn planting progress. Last week's report had 36% of the US winter wheat crop in good/excellent condition, up from 34% a week previously. However, the proportion of the crop rated very poor also increased from 10% to 12% last week. It will be interesting to see if last week's hard freeze is reflected in any way.

Ukraine said that they'd exported 20.2 MMT of grains so far this season, a 22% increase on last year, including 11.4 MMT of corn and 6.6 MMT of wheat. APK-Inform Agency said that spring grain production in Ukraine will total 32.1 MMT as average yields rise 13% from 3.45 MT/ha to 3.91 MT/ha.

Beneficial winter rains will see Turkey's wheat crop rise 13.5% to 17.6 MMT this year. That means 2013/14 imports will fall from 3.7 MMT this season to 3.2 MMT in 2013/13, according to the USDA's FAS.

The United Arab Emirates purchased 15,000 MT of Indian-origin wheat in a tender, according to Reuters. Bangladesh are tendering for wheat again this week, and are also probably most likely to buy Indian origin. Jordan are re-tendering again for 100 TMT of optional origin wheat, although they've baulked at the prices offered in their last three tenders.

As well as focusing on developing winter wheat crops in Europe and the US, the market is also starting to think about wheat planting in Australia. "New South Wales, Victoria and South Australia have received no important rainfall in April, the normal start of the winter wheat planting season. Persistent dryness may be linked to an emerging El Nino signal. Sea surface temperatures have been steadily warming in the eastern equatorial Pacific Ocean over the past several weeks. New South Wales, a top wheat state that grows around one-third of Australia’s crop, is especially sensitive to the El Nino experiencing drought," say Martell Crop Projections.