Nogger's Blog

18/04/13 -– The EU grains market closed mixed, on a day when outside influences took a back seat and traders weighed up an assortment of data from various private forecasters.

London wheat closed with front month May 13 down GBP1.00/tonne at GBP197.00/tonne and new crop Nov 13 up GBP0.20/tonne easier at GBP186.50/tonne. May 13 Paris wheat finished EUR1.75/tonne lower at EUR245.00/tonne.

The first numbers for European traders to pour over were from French analysts Strategie Grains, who cut their EU soft wheat production forecast for 2013/14 for the fourth month in succession. They lopped 0.5 MMT off last month's estimate, for what will be a 28 member trade bloc come the harvest, to give us a crop of 131.1 MMT - although that is still a rebound of 5.2% on last year. They also cut their EU-28 barley production forecast by 900 TMT to 54.2 MMT, principally due to a switch out of spring barley into corn.

If they are correct then this year's barley crop in Europe will be slightly lower than last season's 54.5 MMT at 54.2 MMT. Corn production potential was raised 0.5 MMT from last month to 66.5 MMT, an increase of 18% on last year.

Leading the way down for wheat output in Europe was a 330 TMT reduction for production here in the UK, adding to a similar cut of 300 TMT last month, to an average guess of 11.78 MMT from within a worst/best case spread of 10.9-12.4 MMT. That spread equates to a drop of at least 7%, and at worst a decline of 18% on last year. Some would currently suggest that "only" coming in 18% down on 2012 would be a result at this stage, even if yields were a 24 year low last year.

Either way, the UK looks certain to be a major importer again in 2013/14, with domestic consumption coming in at around 13.6 MMT/year prior to the recent opening (and closing) of any bioethanol refineries.

Even so, despite today's reduction in output Europe will still have around 6.5 MMT more wheat supply in 2013/14 than this season, along with an extra 10 MMT of corn and a broadly similar volume of barley, if the French numbers are correct.

Elsewhere, the traditional Black Sea "pile it high and sell it cheap" brigade are looking forward to a strong recovery in wheat production in 2013. Rabobank today forecast the Ukraine wheat crop at 22 MMT, with Russia chipping in with a further 52 MMT and with a "somewhat conservative" estimate for Kazakhstan of 16 MMT. That's a combined 90 MMT of wheat versus the USDA's estimate of 63.3 MMT that these aggressive three exporters produced in 2012/13.

Rabobank see world wheat production in 2013/14 up 55 MMT, or 8.6%, to 694 MMT. That increase comes despite lowering their US wheat production estimate to 2.05 billion bushels (55.8 MMT) versus 2.269 billion (61.75 MMT) in 2012/13 on the back of weather concerns.

Old crop EU exports continue to run well ahead of year ago levels. Brussels today confirmed that they'd issued 392,104 MT of soft wheat export licences this week, taking the 2012/13 marketing year to date total to 16.32 MMT, up 47% on last year with 10 weeks of the season remaining.

Exports may not be quite so robust in 2013/14 when the Black Sea coffers have been replenished however.