EU Wheat Down, Global Crops Getting Bigger

30/08/13 -- EU grains closed lower Friday, pressured by a pre-long weekend sell off in the US as weather models call for a good chance of rain for much of the Midwest, coupled by a significant cool down for the early part of next week.

London wheat closed with both Nov 13 and Jan 14 down GBP0.25/tonne at GBP157.50/tonne and GBP159.75/tonne respectively, whilst Nov 13 Paris wheat closed down a euro at EUR187.25/tonne. For the week however that still leaves both posting modest gains, with London wheat up GBP0.75/tonne and Paris wheat EUR1.75/tonne firmer versus last Friday.

There's a feeling that a lot rides on this weekend's advertised weather event in the US to decide where corn and soybean prices go from here. And where corn goes wheat will follow.

Wheat crops in France, Germany and Russia have all been revised higher this week. The German Farm Ministry today estimated wheat production there up 11% this year at 24.9 MMT. Whilst official estimates for the French wheat crop are around 36 MMT, private estimates now suggest that production could ultimately prove to be 1.0-1.5 MMT higher than that, versus a crop of 35.6 MMT last year. The quality of both the French and German crops is now said to be pretty good. Meanwhile SovEcon have raised their outlook for Russian wheat production from 50.5 MMT to 51.7 MMT, a 37% increase on 2012.

FranceAgriMer today confirmed that the tail end of the French wheat and spring barley crops had now been harvested. They also increased the proportion of the French corn crop rated good/excellent by one point to 55%.

Early trade in EU wheat for the 2013/14 continues at a brisk pace, with Brussels issuing 687 TMT of soft wheat export licences in the past week, taking the total so far in the new campaign to 3.9 MMT versus only 1.8 MMT this time a year ago. France may be missing out on sales into Egypt but Romanian isn't, they currently account for almost 750 TMT of the 3.9 MMT of licences issued so far, putting them in third place in the EU soft wheat export table. Germany have ousted France to take pole position with 1.3 MMT worth of licences, 200 TMT more than the French. Incidentally the UK has only applied for permission to export 2,050 MT of wheat so far this season.

The HGCA/ADAS said that the UK wheat crop is 40% harvested, with yields marginally below the 5-year average at 7.6-7.7 MT/ha. Specific weights are averaging 76 kg/hl. The winter barley harvest is all but done at 99% complete, whist 30% of the spring barley crop is in the bin. Yields on both are above the 5-year average at 6.5-6.9 MT/ha (versus 6.4 MT/ha normally) and 5.5-5.8 MT/ha (vs. 5.3 MT/ha) respectively. The winter OSR harvest is 70% complete with yields coming in better than feared, although still below average, at 3.2-3.4 MT/ha.

The EU Commission forecast production of wheat, barley and corn in Europe is expected to breach the 250 MMT mark for the first time since 2008, the HGCA note.

"Against the trend of higher production, grain exports in the associated 2013/14 season are actually expected to be lower than the previous season - driven mainly by wheat but also to an extent by barley. The reduced export prospects come as a result of increased competition on the world market with both Russia and Ukraine expected to be more aggressive exporters this season," they add.

Meanwhile Oil World are forecasting a record global oilseed crop of 478.4 MMT in 2013/14. They have the world soybean crop up 6% at 282.5 MMT, the world OSR/canola crop up 3.5% at 64.8 MMT and the world sunflower crop up 13.2% at 40.2 MMT.

The International Grains Council today raised their forecast for the 2013/14 world wheat crop by 4 MMT to 691 MMT, a near 6% rise on last year due to increases for Canada, the EU, Kazakhstan and Ukraine. They also upped the global corn crop by 3 MMT to 945 MMT, a 10% increase versus last year.

The Russian wheat harvest is past halfway at 54.9% complete, producing 39.1 MMT so far, more than last year's harvest in it's entirety. Yields are said to be averaging 42.7% more than last year at 2.84 MT/ha. The Kazakhstan grain harvest is just over 10% complete at 2.076 MMT.

There's talk of India re-entering the world wheat export market following the recent sharp decline in value of the rupee.

Rabobank forecast Paris wheat prices sliding to EUR165/tonne by the turn of the year, with prices eroding further in the first half to 2014 to end the second quarter at EUR150/tonne. Yikes!