Nogger's Blog

12/08/13 -- EU grains closed mixed, although London wheat was lower, with nearby Nov 13 setting a new near 14 month closing low. Paris wheat ended the day a bit firmer, after Nov 13 had earlier hit a lifetime contract low of EUR182.00/tonne.

Nov 13 London wheat ended the day GBP0.90/tonne easier at GBP155.30/tonne and with Jan 14 down GBP1.40/tonne at GBP156.80/tonne. Nov 13 Paris wheat finished the day EUR0.25/tonne firmer to close at EUR183.25/tonne.

Corn, wheat and soybeans in Chicago also set various multi-month lows in the run-up to what was expected to be a bearish USDA supply and demand report.

In a manner of speaking today's report contained "something for everyone" with US corn and soybean yields lowered from last month. Whilst a cut for soybean yields was anticipated, one for corn to most certainly was not.

In the USDA's classic "give it with one hand and take it away with the other" style they raised world 2013/14 wheat production by 7.5 MMT to a record 705.4 MMT.

"Production is raised 2.8 MMT for the European Union with the biggest increases for Spain, France, and Germany, and smaller increases for Romania, Bulgaria, and Hungary. Production is raised 2.5 MMT for Kazakhstan where abundant spring and summer rainfall is supporting prospects for strong yields, much as in the adjoining spring wheat areas of Russia. Ukraine production is raised 2.0 MMT based on the latest harvest results," they said. They also upped Canadian output by 0.5 MMT.

On the flip side of the coin: "Global wheat consumption for 2013/14 is raised 6.9 MMT with increases in wheat feeding projected for a number of countries and higher food use expected for India and Iran. Feed use is raised again this month for China with higher projected imports. Feed use is also increased for the European Union, Syria, Moldova, Kazakhstan, and Morocco," they said.

The global bottom line being world 2013/14 wheat ending stocks were increased slightly from 172.4 MMT to 173.0 MMT (the market was expecting 171.8 MMT).

The bits that we are perhaps most interested in are an EU wheat crop of 141.4 MMT versus a previous estimate of 138.6 MMT. However, thanks to lower EU imports and increased usage of wheat along with exports raised from 20 MMT to 22 MMT, wheat ending stocks in the EU at the close of 2013/14 were lowered from 11.74 MMT to 11.04 MMT (although still up on 2012/13's 9.37 MMT).

An EU wheat crop of 141.4 MMT means that production is up 8.3 MMT on last year, a rise of almost 6.3%. The French crop is now seen at 38.6 MMT (+1.7%), with German output at 24.2 MMT (+8%) and Polish production is 9.3 MMT (+8%). Big production increases are seen from Spain (7.7 MMT, +51%), Romania (7.1 MMT, +34%), Hungary (4.8 MMT, +21%) and Denmark (5.0 MMT, +18%). Even output in the UK was raised, from 11.75 MMT to 11.90 MMT, although that's still more than 10% down on last year.

In other crops, EU barley output was raised from 56.05 MMT to 57.12 MMT, a 4.7% increase on last year (with the UK crop unchanged from last month at 6.75 MMT, a more than 22% increase on 2012). The EU corn crop was trimmed slightly from 65.6 MMT to 65.0 MMT, although still up 11% versus last year. The EU rapeseed production estimate was raise from 19.7 MMT to 20.5 MMT, up 7% versus 2012 - led by a 20% year-on-year increase for Germany to 5.8 MMT. The UK rapeseed crop estimate was unchanged from last month at 1.9 MMT, more than 25% down on last year.

The European bottom line is more wheat, corn, barley and rapeseed than last year.

As ever, a glance over the shoulder at what's going on in "the cheap seats" frequently provides some clues as to whether the worst might now be over for prices hitting these multi-month, and in some cases multi-year lows. Here's the raw data to help you to make your own minds up.

Wheat: Kazakhstan's crop now seen +73% versus 2012, with Russia +43% and Ukraine +36%; Corn: Ukraine +39% (record high) and Russia +10%; OSR: Ukraine +83% and Russia +26%.