EU Wheat Down, Rapeseed At Near 3-Year Low

22/07/13 -- EU wheat closed lower, in a relatively slow start to the trading week, although one not without one or two interesting developments.

Nov 13 London wheat ended the day GBP1.65/tonne lower at GBP165.85/tonne and with Jan 14 also closing down GBP1.65/tonne at GBP167.25/tonne. Nov 13 Paris wheat fell EUR1.75/tonne to close at EUR192.50/tonne. Friendless Aug Paris rapeseed is falling faster than Felix Baumgartner after a particularly heavy Sunday lunch, ending EUR8.50/tonne easier at EUR371.00/tonne -the lowest for a front month since August 2010.

The on, off, UK bioethanol plant Ensus - one of the largest in Europe - has been sold to German company CropEnergies AG, a member of the Südzucker Group who are the largest sugar producer in Europe, at a fraction of the original cost of building the plant which only opened three years ago.

CropEnergies already operate bioethanol production plants in Germany, Belgium and France. They say that the move will potentially increase its annual production capacity of bioethanol by 50% to more than 1.2 million cubic metres and that they plan to spend more than GBP50 million improving the competitiveness of the plant.

That's good news for domestic wheat demand on the face of it, with Ensus potentially requiring around a tenth of the UK crop in 2013/14 were it to run at full capacity and operate on 100% wheat. Although there are a couple of fairly large "ifs" there. It may be that the new owners will continue to also incorporate a certain percentage of corn into the grind, as Ensus were doing when the plant was last operational, and if they do decide to do that then they may also opt to wait until cheap new crop Black Sea material comes onto the market.

There are reports of Black Sea corn for November shipment being available CIFFO (prior to discharge and storage/transport costs) into the UK in the lower GBP150's.

Other interesting news today concerned the announcement last Friday that the US Federal Reserve were going to review their 2003 decision to allow investment banks to trade and store physical commodities, and what the implications of that might be for the grains sector.

On the fundamental news front, the EU Commission's MARS unit released their July yield forecasts today, increasing their projections for wheat, barley, corn and rapeseed on an EU-wide basis. The yield forecasts for soft wheat were in fact raised for twenty four of the EU-28 countries with the exception of Italy, Bulgaria, Finland and Greece.

They now project EU all wheat yields at 5.45 MT/ha, up from the 5.32 MT/ha predicted last month and a 5.0% increase on last season. For all barley they estimate yields averaging 4.78 MT/ha versus 4.68 MT/ha in June and up 9.1% compared to 2012. For corn they are now looking for an average EU-28 yield of 7.22 MT/ha, versus 7.13 MT/ha in June and up 18.9% compared with 2012. OSR yields are seen at 3.08 MT/ha (versus 3.02 MT/ha last month although still down slightly on 3.11 MT/ha in 2012).

Spanish grain yields potential are said to be amongst the highest on record, up more than 50% in the case of wheat compared to 2012, and rising by over 75% in the case of barley.

In the UK, wheat yields were estimated at an average 7.90 MT/ha, up 18.7% versus last year (and compared to the 7.63 MT/ha forecast in June). Barley yields here are called at 5.69 MT/ha, up 3.1% compared with 2012 and versus the 5.54 MT/ha predicted a month ago. OSR yields were estimated at 3.32 MT/ha, the same as in June and slightly lower (-2.1%) than the 3.40 MT/ha achieved in 2012. Considering the air of total despondency around concerning the prospects for UK rapeseed yields earlier in the year that would be very impressive, if it can be achieved.

"With relatively dry days and mild temperatures, the period from 1 June until 15 July has brought favourable conditions for (UK) crop growth that improve the outlook for reasonable yields," they said.

French wheat and barley yield potential was increased versus June, although corn's prospects were cut. German wheat and barley yields were also raised from last month, with corn potential left unchanged. Essentially the warmer and drier weather experienced in the last 6 weeks has been of benefit to wheat and barley, but not so for corn, they suggested.

Separately to MARS the HGCA today released their forecasts for the UK harvested area for 2013. That gave us a UK wheat area down 19% versus 2012 at 1.61 million acres, whilst the total barley area is seen up 26% at 1.23 million ha and the total OSR area pegged 9% lower than last year at 686k ha.

If the HGCA are correct with their area estimates, and MARS also on the ball with their yield forecasts (two more sizeable "ifs" I'll grant you), then the UK will harvest 12.7 MMT of wheat, 7.0 MMT of barley and 2.28 MMT of OSR this year - all far better results than almost anybody imagined a few months ago!

But then again, if me Auntie had a cock she'd be me Uncle wouldn't she? She has got a pretty impressive handlebar moustache though, just thinking about it...