EU Wheat Down As Eastern Europe Prospects Weigh

Posted by Nogger - a legend in his own mind at 08:26 | Categorized as

01/08/13 -- EU grains were firmer for a good part of the day, but turned lower in afternoon trade pressured by a weaker Chicago market once the daytime session across the pond opened.

London wheat closed with front month Nov 13 GBP1.40/tonne lower at GBP162.85/tonne, Jan 14 was also GBP1.40/tonne easier at GBP163.85/tonne and Nov 13 Paris wheat fell EUR2.50/tonne to EUR187.25/tonne. Both London and Paris wheat are now almost back to the recent lows.

Pressure from bumper and cheap Eastern European crops is weighing on the market. Ukraine's early grain harvest (excluding corn) is 89% complete at a shade under 28 MMT. That includes a wheat harvest of 20.3 MMT off 93% of the planned area. Add on a bit of spring wheat, for which the harvest so far totals 115.4 TMT off 34% of the plan, and they look like finishing up with a crop in excess of 22 MMT versus 15.8 MMT a year ago.

Ukraine's Ag Ministry estimated Ukraine’s 2013 grain crop at a record high of 57.1 MMT versus a previous estimate of 53-54 MMT and compared to the 2012 grain crop of 46.2 MMT.

Ukraine's July grain exports were 1.2 MMT. Those are seen rising to 1.5-1.7 MMT this month. Full season exports could be a record 28 MT said the Ministry, adding ominously that "Ukraine will carry out a confident and even aggressive policy on the global food market, especially in its grain segment." Their target includes a record 26 MMT corn harvest, of which 16 MMT will be shipped abroad.

Corn production in Ukraine has really exploded in the past 3 years, as recently as 2010/11 they were harvesting a crop of less than 12 MMT, of which only 5 MMT went for export.

Later in the day the IGC released their latest world crop production estimates, increasing the size of the world wheat crop to 687 MMT from a previous estimate of 683 MMT. The crop in Europe was raised to 141.5 MMT versus a previous estimate of 139.4 MMT.

German analysts F O Licht said that Europe would reap a corn crop of 67 MMT this year, up 13.6% on the 59 MMT produced last year, despite some problems in the EU's largest producing nation France. Again it's in the east where the big gains are coming from. Romania's 2013 corn harvest will jump 78% to 10.5 MMT from 5.9 MMT and Hungary's will leap almost 77% to 8.3 MMT from 4.7 MMT last year, they added.

The USDA FAS office in Serbia forecast grain production there this year to jump 58% from 1.9 MMT to 3.0 MMT, with exports rising sharply to 1.0 MMT.

The USDA attaché in the Czech Republic estimated 2013 total grain output at 6.5 MMT, up 16% from a year ago. He estimated their 2013 rapeseed crop at a record high of 1.3 MMT.

Rusagrotrans lowered their forecast for the Russian grain crop from 94.3-96.5 MMT to 92.1-93.8 MMT, although that's still well ahead of the 77.2 MMT produced last year.

At home, the HGCA said that "The very warm and sunny weather has been beneficial for most crops, helping to drive grain fill, although some crops on lighter soils have come under moisture stress and others have suffered in the high peak temperatures."

They estimate the UK barley harvest at 10% complete, noting that "there is good progress in the south and east, but most regions are still 7-10 days away from the main start of harvest." A bit of wheat has also been cut, although "most crops in the south are still at least 10-14 days away from harvest. Further north the earliest crops are still 14-21 days from harvest," they added.