EU Wheat Mixed, Chinese News Supports

17/07/13 -- EU wheat closed mixed. A stronger pound weighed on London wheat, following news that the BoE voted 9-0 earlier this month to keep QE unchanged versus a 7-2 split on June. UK unemployment also fell 57k, said the ONS.

Nov 13 London wheat ended the day GBP0.10/tonne lower at GBP168.40/tonne and with Jan 14 also closing down GBP0.10/tonne at GBP169.60/tonne. Nov 13 Paris wheat rose EUR0.50/tonne to close at EUR194.50/tonne.

Without doubt the most bullish news around seems to be emanating from China. A report on Reuters today now suggests that 20 MMT of their domestic 2013 wheat crop may have been downgraded to only being suitable for feed usage after winter frosts and harvest time rains took their toll. That's up from the 10 MMT previously suggested.

There is now trade talk of Chinese wheat imports of more than 10 MMT this season, far higher than the 3.2 MMT imported in 2012/13 and above the USDA's revised 8.5 MMT forecast of last week. That would suddenly make them the largest wheat buyer in the world. Yields were said to have been down as much as 40% in some regions, suggesting that this may also be a quantity problem as well as a quality issue.

That theory is backed up by the fact that they are also buying corn as well as wheat on the international market.

They are also said to be currently in negotiations with Australia to buy a further 500 TMT of wheat, in addition to recent purchases from them, the US and France.

Old crop Australian wheat stocks are said to be running low, ahead of the harvest which is due to begin around late October, early November. South Korea today bought US wheat from Toepfer for September shipment, but switched to Australian origin material for Oct/Nov shipment.

Staying with the Southern Hemisphere, Argentina have also hung up the "sold out" sign until they begin harvesting wheat at around the same time as Australia. Brazil are said to therefore be being forced to cast their import net further afield.

The Russian wheat harvest in the southern region of Krasnodar is said to be over. Production is thought to be 7.1 MMT, with yields up 25% at 5.2 MT/ha. On a national level the 2013 harvest is currently said to total 25.4 MMT, off 18% of the planned area, with average yields 24.5% higher than a year ago at 3.1 MT/ha. Barley yields however are only 11% up on last year's disaster.

There are strong reports though that spring sown crops in particular will bring these figures down sharply. A state of emergency is said to have been introduced in the Perm region because of drought.

Wheat production potential in Kazakhstan is also being downgraded, although Ukraine largely seems to have escaped the melee and grain production there this year could test the previous record of 56.7 MMT set two years ago.

EU harvest pressure is seen capping any rally attempts for the time being. Cheap Eastern European and Ukraine wheat supplies may weigh on market sentiment, and prices, for the next few months. A strong pick up in Chinese demand, and the possibility of Russian yields dropping off as the harvest there progresses could offer support however.