EU Wheat Slides Late On
10/04/13 -– EU grains traders spent the day sitting on their hands waiting for the USDA April World Supply and Demand report to come out. Unfortunately these reports are now only released at 5pm London time, just as European markets are closing. At least we don't have to wait a whole Easter weekend to start trading this one though.
A late whiff of bearishness from the USDA saw London wheat close with front month May 13 down GBP2.50/tonne at GBP198.55/tonne and new crop Nov 13 GBP1.00/tonne easier at GBP187.25/tonne. May 13 Paris wheat finished EUR0.25/tonne firmer at EUR245.25/tonne.
Concerns remain about crop potential in the UK and France. French soft wheat development lags last year by 19 days and is 9 days behind 2011 (as of April 1), according to FranceAgriMer.
The USDA attaché in Rabat is clearly bullish on grain production potential in Morocco, forecasting output at 7.9 MMT this year, an increase of 55% on twelve months ago. The wheat harvest, which normally takes place in May/Jun, will amount to 5.9 MMT, up 52.5% from 3.87 MMT in 2012, the attaché said.
Such a strong recovery in production this year led the attaché to cut his forecast for Moroccan 2012/13 wheat imports from 4.0 MMT to 3.3 MMT, and estimate that 2013/14 import needs will decrease further to 2.7 MMT.
The USDA office in Cairo meanwhile increased their forecast for Egyptian wheat production this year from 8.5 MMT to 8.7 MMT. The cash-strapped North African nation will be forced to use up most of its domestic wheat reserves this season as it struggles to find the cash needed to import wheat on the international market to fund its subsidised bread program.
Egypt's 2012/13 wheat ending stocks could fall below 1 MMT, the USDA attaché said, versus around 6.7 MMT a year previously. State wheat buyer GASC has only imported 3.4 MMT of wheat so far this season, and looks unlikely to be in the international tender market again until it can secure a loan from the IMF. Last season they imported more than 5 MMT of wheat. A shortage of diesel could disrupt this year's harvest, also due to start next month, as well as the movement of grain, they warned.
Russia sold 51,840 TMT of intervention grain onto the domestic market in it's now regular twice weekly tender offering, that brings the total volume sold to date since sales began at the end of October to 2.764 MMT.
Freezing temperatures in the western plains are keeping crop watchers anxious about US winter wheat production prospects. The mercury dropped into the upper teens – low 20's F last night, with another hard freeze anticipated tonight, according to Martell Crop Projections.
Further north, heavy snow is seen delaying planting in the northern Midwest and Canada. "April northern Midwest temperatures are running 30 F colder than last year, a classic symptom of the Arctic Oscillation. Fieldwork in North Dakota is not expected to start until April 24. In the Canadian Prairies, Saskatchewan wheat fields are buried beneath a thick layer of snow," they add.
DTN Ag forecast a cold trough to remain entrenched across the Canadian Prairies and Northern US Plains bringing temperatures 15-20 F below normal for this time of year in the 5 days ahead. Spring wheat plantings in the region are clearly going to be late.
Brazil have announced that they will double their wheat import quota for purchases from outside of their regional free trade bloc. The move reflects lower production, and reduced quality, in both Brazilian and Argentine wheat this season.
Ukraine wheat remains aggressively offered in the marketplace for new crop positions, with milling wheat at USD265/tonne (around GBP173/tonne) FOB the Black Sea and feed wheat priced as low as USD245/tonne (around GBP160/tonne) for Jun/July shipment. Meanwhile India must decide what to do with it's anticipated record, or near record, wheat crop - the harvesting of which is already underway - given the huge carryover surplus that they still have from last year.
Both are limiting factors. If India do decide to capitulate on price to stimulate some volume movement then that could shatter whatever window of opportunity remains for those still wanting some upside this side of new crop in Europe.
The USDA numbers, and their implications on prices, will be discussed in tomorrow's report.
