EU Wheat: Same Song, Different Day

17/06/13 -- EU grains slumped to new lows once more as Jul 13 London wheat finished the day GBP2.50/tonne easier at GBP160.75/tonne, and with Nov 13 ending GBP0.30/tonne down at GBP165.00/tonne. Nov 13 Paris wheat settled EUR0.50/tonne lower at EUR195.75/tonne.

Jul 13 London wheat traded down to GBP160.00/tonne at one point - a near 13 month low for the contract and the lowest level for a front month since January 2012. Both London and Paris wheat are down around 22% since the turn of the year on the front month continuous chart.

Jul 13 London wheat has now closed lower in 10 of the last 12 trading sessions, losing GBP22.75/tonne during this bear run.

The EU is looking like having a relatively average crop this year. Good in some places, not so good in others, although yield potential is generally seen better than it was a month ago. The Black Sea is shaping up for a strong rebound in output, and that is what is hanging over the market right now, and is dragging world prices lower.

The EU Commission's MARS unit said that crop conditions across the continent have been mixed during the past month. "An over-wet and cold May has constrained crop development in large parts of central Europe. Good conditions prevailed in Romania, Hungary, and, especially, Spain where an excellent season boosts spring barley forecast yields," they observed.

EU-wide soft wheat yields were forecast up fractionally from last month to 5.55 MT/ha, a 2.6% increase on last year. Barley yields are seen at 4.68 MT/ha versus 4.56 MT/ha last month, a 7.6% increase on 2012, whilst corn yields are expected to jump to 7.13 MT/ha, from the 6.87 MT/ha estimated in May and up more than 20% on 5.91 MT/ha last year. OSR yields are seen averaging 3.02 MT/ha, down slightly from the 3.06 MT/ha forecast last month and 2.6% lower than last year.

Yields in the UK, France and Germany were forecast unchanged to slightly lower this month compared to May. In France, where they said that cold and wet conditions have delayed crop growth, soft wheat yield potential was revised down from 6.91 MT/ha to 6.87 MT/ha, a 4.6% decline on last year's 7.2 MT/ha. Germany's soft wheat yields were pegged at 7.35 MT/ha compared to 7.48 MT/ha last month but little changed from 7.33 MT/ha in 2012. UK wheat yields were estimated at 7.63 MT/ha versus 7.68 MT/ha last month, but up almost 11% on last year's 6.88 MT/ha.

In Germany they said that "wet conditions in the south and east of the country are constraining plant development on heavy soils, while conditions are more favourable in the north-west. Yields are now close to or below the 5-years average for all crops." In the UK "a period of favourable weather conditions has sustained steady crop growth. However, both winter and spring crops still show a strong developmental delay. They retain a fair yield potential, but the shift in time exposes them to higher risks," they noted.

In Spain "below-average temperatures are favouring the ripening of winter crops in southern regions. Spring cereals are currently starting the grain-filling stage under favourable weather conditions. Yield potentials both for winter and spring cereals are among the highest ever," they added.

Russian spring grain plantings have been completed on 30.4 million hectares, up slightly on the 30.3 million originally estimated by the Ministry. APK Inform forecast the 2013 Russian wheat crop at 52.1 MMT, in line with other trade estimates and 38% up on last year. They say that the wheat exportable surplus in 2013/14 will be 15 MMT.

APK Inform estimated the Kazakhstan wheat crop at 14.3 MMT, up 46% on last year, although lower than the USDA's 15.0 MMT.

The Ukraine Weather Centre forecast wheat production there this year at 20.0 MMT, a 27% increase on the 2012/13 crop, and a bit higher than the USDA's 19.5 MMT estimate. The local Stats Office say Jun 1 grain stocks in Ukraine were 6.3 MMT, down 42% on year ago levels, including 2.6 MMT of corn, 2.5 MMT of wheat and 0.7 MMT of barley.

Winter wheat harvesting in the US is also underway, adding a little bit of seasonal pressure, although early results are mixed. The USDA will report tonight on crop conditions and planting progress for spring wheat (only 80% done last week versus the 5-year average of 92%) as well as those for corn and soybeans. Weather forecasts for the week ahead are generally favourable offering warmer and drier conditions.

South Korea is tendering for 55 TMT of feed wheat for October shipment which may go to the Black Sea. They are also in for 140 TMT of corn for Oct/Nov shipment, including Black Sea origin for the first time, along with 6 TMT of feed barley for October shipment.