Nogger's Blog

31/07/13 -- EU grains ended the day managing a bit more consolidation from recent losses for a second session. The recent fall to 12-19 month lows in London and Paris wheat has flushed out some buying interest and bargain hunting, even if most of it is being absorbed by Black Sea sellers for the time being.

On the day both Nov 13 and Jan 14 London wheat closed GBP1.75/tonne firmer at GBP164.25/tonne and GBP165.25/tonne respectively whilst Nov 13 Paris wheat settled EUR2.50/tonne higher at EUR190.00/tonne.

The pound fell to its lowest versus the euro since mid-March and a 2-week low versus the US dollar ahead of tonight's Fed announcement regarding interest rates and QE. The BoE and ECB are due to make similar statements tomorrow.

The EU Commission yesterday raised their forecast on EU wheat, barley and corn production for 2013. They now peg the all wheat crop here at 140.2 MMT, up 6.2% on last year's 132.0 MMT. For barley they see an EU-28 crop of 59.4 MM, up 9.8% on last year, and for corn they see production leaping 22% to 70.9 MMT. All three forecasts are well above the current USDA estimates of 138.6 MMT, 56.0 MMT and 65.6 MMT respectively.

Rabobank really threw a spanner in the works with their forecasts for wheat prices going forward. They predict French wheat futures falling to EUR165/tonne in Q4 of this year, declining further to EUR155/tonne in Q1 of 2014 and EUR150 in Q2 of next year. CBOT wheat will slide to USD6.10 by the end of the year and USD5.50 in Q2 of 2014, they estimate.

Large increases in exportable wheat surpluses in the Black Sea region are forecast to result in very aggressive pricing, which is likely to dominate world wheat trade over the coming months, they said.

Strong import demand from China has however provided some strength to the global wheat market amid what is otherwise fundamentally shaping up to be a bearish supply and demand scenario for 2013/14, they added.

They were the first to highlight growing demand from China with a forecast for Chinese imports of 10 MMT back in June when the USDA were still running with an estimate of 3.5 MMT.

Russia's grain harvest now stands at 35.7 MMT off 27.3 % of the planned area, with yields up 26.2% to 2.84 MT/ha. Wheat accounts for 28.7 MMT of that with yields up 27.4% at 3.07 MT/ha say the Russian Ag Ministry.

Ukraine's wheat harvest stands at 19.56 MMT off 90% of the planned area, which suggests a final crop of around 21.5 MMT versus the USDA's current projection of 19.5 MMT.

Whilst there may be plenty of wheat around in 2013/14, quality could be an issue. US wheat has a problem with sprouting by all accounts following heavy rain in June and early July. Agritel say that it's very difficult to find new crop French wheat coming in with a protein level of above 11% at the moment. There's talk of Russian wheat also having low proteins. It was interesting therefore to see Russian offers usurped by Ukraine and Romanian wheat in yesterday's Egyptian tender.

Russian prices are beginning to trend higher and the government is expected to step into the market soon to buy wheat to re-fill depleted domestic reserves.

Aug 13 Paris rapeseed finally went off the board today, having lost more than 20% of it's value since the beginning of June. Canadian canola futures closed at a 33-month low last night amidst forecasts for a record world rapeseed crop this year at a time when demand is slowing and the price outlook for other oilseeds such as soybeans and sunseed is also trending lower.