London Wheat Ends At Lowest Levels Since Noah Was In Short Trousers

25/06/13 -- EU grains closed mixed with a very thin and choppy Jul 13 London wheat finishing the day GBP5.00/tonne easier at GBP158.50/tonne, and with Nov 13 ending unchanged at GBP167.50/tonne. Nov 13 Paris wheat settled EUR0.25/tonne steadier at EUR196.75/tonne.

This was the lowest close for a front month in London wheat since Noah was in short trousers - well as far back as I can remember to early 2012 at least. The Jul 13 future is clearly very technical, it didn't actually trade lower than GBP160.00/tonne on the day, and could easily finish GBP5.00/tonne higher later in the week, just as it did on Friday when Nov 13 was GBP0.25/tonne lower.

The spectre of a strong rebound in Black Sea/Eastern European production this year still hangs over the market. Serbian/Hungarian, Romanian, Ukraine and Russian origin wheat were all competitively offered in Iraq's wheat tender that closed over the weekend relative to EU or US prices.

The Ukraine Weather Centre estimated 2013 grain production at 52-53 MMT versus 46.2 MMT last year. Rain later in the week in Western Ukraine should improve prospects for corn in the region, said Agritel.

The Ukraine Ministry said that the harvest there currently stands at 2.2 MMT, with average yields so far at 2.32 MT/ha, up 43% on this time a year ago. The total includes 1.44 MMT of winter barley and 687 TMT of winter wheat.

The Russian Ministry said that 2.1 MMT of winter grains had now been harvested there, with yields averaging 4.17 MT/ha, up 40% on year ago levels. That includes 945 TMT of barley, with yields up 44%, and 756 TMT of wheat, where early yields are coming in 39% above last year.

The Russian government is still selling intervention stocks off, to be replaced by new crop grain at some point no doubt. They sold 39,477 MT at today's offering, bringing the total sold so far since the auctions began last October to 3.61 MMT.

Stats Canada estimated the Canadian all wheat area at 26.18 million acres, up 10% on year ago levels, although slightly lower than the 26.618 million forecast in April. They pegged this year's barley area at 7.17 million acres, down 3.2%, with corn plantings up 2.8% at 3.645 million and the canola area down 8.5% at 19.7 million. Despite reduced plantings on the latter a recovery in yields this year is expected to see production rise.

This means that "Canadian producers have reduced summer fallow from 11.7 million acres in 2011 to 3.49 million acres (in 2013) in response more marketing flexibility," said Benson Quinn Commodities.

Israel are tendering for 85 TMT of corn, 56 TMT of feed wheat and 20 TMT of barley. Black Sea origin may be the most likely source.

Deutsche Bank became the latest investment bank to predict sharply lower grain prices heading into the final quarter of the year. They said "we see downside to December corn towards USD4.60 a bushel, but we expect demand from China to support corn in the USD4.50-a-bushel range," according to Agrimoney. That's around 15% below where the Dec 13 future currently stands.

Chicago wheat prices could fall around 10% from where they now trade and soybean prices could fare the worst of the three, they said, as they recommended selling November soybean futures short. Prices could fall below USD10 a bushel by early next year, they warned - a dip of around 20-25% versus where the Jan 14 future currently lies.