London Wheat Down, Playing Catch Up With Yesterday

07/05/13 -- EU grains were mixed, with the London market playing catch up after a day's closure, Paris wheat decided that it had done all it's falling yesterday.

London wheat closed with front month May 13 down GBP0.50/tonne to GBP191.25/tonne and with new crop Nov 13 GBP1.80/tonne easier at GBP182.75/tonne. May 13 Paris wheat was unchanged at  EUR245.75/tonne.

The jungle drums are saying that there's concern mounting over persistent dryness in the south of Russia and southern and eastern parts of Ukraine. In some of these areas it hasn't rained since 10th April, according to Agritel. A report on Reuters, quoting an un-named a senior weather forecaster, said that yields of spring barley and spring wheat in Ukraine could fall by "as much as 30%" if they don't get rain in the next two weeks.

"Ukraine topsoil moisture is less than 5 mm currently. Moisture in the deep layer is still favourable over most of the farm belt however, due to a heavy snowmelt. The worst dryness exists in Crimea, southern and eastern Ukraine, where the winter-spring precipitation has been extremely light. Hot temperatures have accelerated soil drying, topping 80 F several days last week. Drought and heat stress is linked to a persistent ridge of high pressure in northern Africa expanding across into Ukraine and southern Russia. The forecast remains hot and mostly dry in the week ahead," note Martell Crop Projections.

Last week, the USDA's FAS said that wheat production in Ukraine would jump 43% to 22.6 MMT in 2013/14, with exports rising 70% to 11 MMT. Local analysts are less bullish, with UkrAgroConsult now forecasting a wheat crop of 20.23 MMT this year, and ProAgro pegging the new wheat harvest at 19.89 MMT. Even so, both are still considerably higher than the USDA's 2012/13 estimate of 15.76 MMT.

Not everybody is convinced that this is a big issue for the time being however. Local agronomist Mike Lee says "On the ground no one is complaining of dry conditions just yet, apart from those in the East and South, but they all ways do so there's no news there." Indeed, the SE of Ukraine suffers habitually from drought.

Russia's spring grain planting meanwhile is advancing rapidly, aided by the dry weather, at 27.4% complete. To date 60% of the spring corn crop has been sown, along with 50% of spring barley and 7% of the spring wheat. Decent rains are in the forecast in the May 14-22 time frame, which will be extremely useful if they arrive.

Australia is another country getting flagged up as too dry, although "critical" rains are in the forecast for Western Australia state today/tomorrow, moving onto South Australia state 4-7 days from now. The GFS model has NSW, Victoria and Queensland remaining dry for the next two weeks, although the CMC model has better than average rains for all but the extreme east coast of these states between one to two weeks from now. CBH estimated the WA 2013/14 wheat crop at 8.08 MMT, up 17% from 6.9 MMT a year ago.

The Argentine government have floated a plan to reimburse farmers with some or all of the existing 23% export tax on wheat in a bid to encourage plantings, which typically take place May/Jul. The country has slipped out of the world's top six wheat exporting nations rankings table following repeated government taxes and strict export quotas on wheat in recent years. Having produced a crop of 17.2 MMT in 2010/11, output has slipped to below 10 MMT this season as growers have cut back sharply on plantings.

The Buenos Aires Grain Exchange say that they expect Argentine farmers to increase the wheat planted area 8.3% to 3.9 million hectares this year, although even if they do that would still be around 20% down on the average area sown over the last 10 years.

The French Ministry pegged the soft wheat planted area there at 4.98 million hectares on Friday, up 2.4% on last year. The corn area is seen roughly unchanged at 1.64 million ha, with the area given over to OSR down 8% to 1.48 million at the expense of sunflower sowings which are seen rising 7% to 0.73 million ha.

Oil World have had a rethink on last week's UK OSR production forecast of 2.3 MMT, which was widely greeted with scepticism (at best), revising that number down to 1.8-1.9 MMT, a drop of around 25-30% on last year. French output was held steady at 5.2 MMT, down 5% on last year with the Germans becoming Europe's leading producer with a crop of 5.45 MMT, up 13% on 2012, they say.