EU Grains Mixed, Is New Crop Corn The Next Threat To Wheat?

15/08/13 -- EU grains closed mixed, but mostly higher, although luckless Nov 13 London wheat extended its losing run to eleven straight sessions despite attempting a rally in early trade. Paris grains were supported by a weaker euro.

At the close Nov 13 London wheat was GBP0.40/tonne easier at GBP150.75/tonne and with Jan 14 down GBP0.35/tonne at GBP152.75/tonne. Nov 13 Paris wheat finished the day EUR3.75/tonne firmer to close at EUR185.75/tonne.

The world wheat crop just keeps getting bigger. MDA CropCast today added a hefty 12.2 MMT to last week's forecast, making the global 2013/14 wheat crop 50 MMT higher than last year, a rise of almost 8%. Output in the FSU-12 led the way, with an increase of 4 MMT on last week to 99.1 MMT, a 36% increase on 2012/13.

They now forecast wheat production in Russia up 40% at 53.1 MMT, with the Ukraine crop seen rising 39% to 21.5 MMT and Kazakh output jumping 72% to 21.5 MMT.

The rise in world wheat production wouldn't be so bad if it wasn't also accompanied by a large hike in the global corn crop to easily record levels as well. MDA CropCast raised their forecast by 2.9 MMT from last week to 931.5 MMT, up 112.5 MMT, or 13.7% versus output in 2012/13.

Strategie Grains also joined the growing list of forecasters increasing their wheat production estimates. They now peg EU-28 soft wheat output at 134.2 MMT, up 800 TMT on last month and a 7% increase on last year. They have the durum crop at 8.1 MMT, giving an all wheat production of 142.3 MMT which is 900 TMT more than the USDA said on Monday.

The French analysts agreed with the USDA that the EU will export a record 22 MMT of wheat in 2013/14, noting relatively low EU prices and brisk international demand.

They also added 1 MMT to their EU-28 barley production estimate from last month, taking output to 58.3 MMT, also 7% up versus last year. The EU-28 corn crop will total 65.7 MMT, a 15% increase on 2012/13, they added.

ODA meanwhile said that the French soft wheat crop will total 37.2 MMT, with yields averaging 7.45 MT/ha. That's above forecasts of around 36 MMT from the French Farm Ministry and FranceAgriMer. The latter said earlier in the week that French wheat yields north of the River Seine were "good to very good" - typically coming in at around 8-9 MT/ha, and even as high as 12 MT/ha in some cases.

SovEcon said that Russia exported around 2.5 MMT of grains in July, with shipments in August and September expected to rise to around 3 MMT/month. They see total 2013/14 exports at 19-20 MMT, including 14-15 MMT of wheat.

The Russian Ag Ministry said that carry in grain stocks from 2012/13 were 7.2 MMT, with production this season now estimated at 90 MMT and domestic consumption of 70.1 MMT. They also see exports possibly as high as 20 MMT versus around 16 MMT in 2012/13.

Ukraine is extremely active on the export front, loading 330 TMT of wheat and 286 TMT of barley for export last week alone, according to Agritel.

Despite all this stiff competition, EU wheat exports have also got off to a strong start to the 2013/14 campaign, as highlighted by yesterday's announcement that Brussels had issued soft wheat export licences for almost 700 TMT this past week. Will they hold up at these levels though once new crop corn also comes onto the market?

New crop Nov 13 French corn is almost EUR20/tonne cheaper than Nov 13 wheat on the MATIF market. French corn FOB Bordeaux at harvest is currently quoted in the market at around EUR167/tonne and Ukraine corn is even cheaper.