EU Grains Drift Lower Heading Into USDA Report

10/05/13 -- EU grains were mixed, but mostly lower, in quiet and nervous trade heading into another major Friday night USDA report. May 13 Paris wheat, which has seen choppy trade this week, went off the board making new crop Nov 13 the new front month.

London wheat closed the day with front month May 13 up GBP0.25/tonne to GBP191.25/tonne, all other months apart from those of the 2014/15 crop year were lower, with new crop Nov 13 ending GBP1.50/tonne easier at GBP181.50/tonne. May 13 Paris wheat expired officially EUR1.75/tonne higher at EUR247.00/tonne, everything else was lower including Nov 13 which closed GBP2.25/tonne easier at GBP208.75/tonne.

UK growers continue to fret over their crops and generally think that sharply lower wheat production here this year means that prices must go higher. It is worth noting however that Nov 13 Paris milling wheat closed tonight at the equivalent in sterling of GBP177.00/tonne, whilst Nov 13 Paris corn closed at the equivalent of GBP158.50/tonne.

The market has been drifting slightly lower heading into this report, with May 13 London wheat down GBP0.50/tonne versus last Friday. New crop Nov 13 London wheat was down GBP3.05/tonne on the week, whilst May 13 Paris wheat fell EUR1.75/tonne.

Pretty decent and widespread rains across much of the UK and northern France today/tomorrow should perk both winter and spring crops up a bit, although more would be helpful. There's no weekly crop condition report from the French today due to holiday interruptions this week, that is now due to be released on Monday.

Rouen's weekly grain export total jumped from 158 TMT last week to 208 TMT this week, including 150 TMT of soft wheat. Not too bad a performance for a holiday week. Algeria was the top destination for the soft wheat, although the UK also featured as a buyer of 20,630 MT along with 3,300 MT of feed barley and 3,150 MT of French corn.

FranceAgriMer reported March soft wheat exports of 1.83 MMT, up 12% on last year with Morocco (296 TMT) and Algeria (330 TMT) the top destinations. That takes Jul/Mar exports to 13.18 MMT versus a full season estimate of 16.92 MMT, meaning that exports need to average 1.25 MMT/month for the last three months of the season to reach that total.

Algeria were said to have bought 175 TMT of optional origin durum wheat for July shipment in a tender.

Western Australia got decent rains this week, with the Geraldton area picking up 40-60mm totals, which will be a boon ahead of wheat planting. Production in the state, normally Australia's largest wheat producer and exporter, fell to 6.9 MMT last year. It is thought that output may rebound to around 10 MMT there this year if weather conditions aren't too unkind.

Southern and eastern Ukraine (not normally the most productive parts of the country) and southern Russia (the main winter wheat area) are dry and expecting little in the way of moisture relief in the week ahead. Temperatures here are expected to hit 90F by the end of next week.

As London and Paris markets were closing the USDA released their May WASDE report, which included a first glimpse into production prospects around the globe for the season ahead. They were always likely to be optimistic with these projections at this early stage, and so it proved, although generally the numbers weren't outlandish. There were already plenty of other trade estimates in the same ballpark.

They gave us a world wheat crop in 2013 of a record 701 MMT, up 7% versus 2012, although not that far above yesterday's 695 MMT estimate from the FAO. For corn output they also forecast a record global crop of 966 MMT, a rise of 12.7% on 2012. Again that is "only" 6 MMT more than the FAO forecast yesterday.

Closer to home they gave us an EU-27 (no mention of Croatia who are set to join the club this summer) wheat crop of 138.77 MMT, up 5% on last year and almost identical to 138 MMT from the FAO yesterday. They also forecast the EU-27 barley crop up 1.7% to 55.3 MMT (versus 54.2 MMT from Strategie Grains) and the corn crop here 12.6% higher at 63.8 MMT, which is actually a little lower than the 65 MMT that the FAO estimated yesterday. The EU-27 rapeseed crop was forecast almost 5% higher at 20 MMT (Oil World said 19.8 MMT earlier in the week).

For the UK they estimate the wheat crop down 13% at 11.55 MMT, the barley crop up 18% at 6.5 MMT and the rapeseed crop down 22% to 2.0 MMT. Apart from the latter, the rest of the numbers don't look too outrageous.