EU Wheat Mixed, Strong Pound Weighs On London

06/09/13 -- EU grains closed mixed with Nov 13 London wheat settling GBP0.55/tonne higher at EUR155.05/tonne and Jan 14 GBP0.75/tonne firmer at GBP157.50/tonne. Mar 14 London wheat on the other hand closed GBP1.55/tonne lower at GBP157.00/tonne, inexplicably now at a discount to Jan 14 (a situation that will surely be rectified next week). Nov 13 Paris milling wheat rose EUR1.25/tonne to EUR188.75/tonne whilst Nov 13 Paris rapeseed settled EUR2.20/tonne lower at EUR382.00/tonne.

For the week Nov 13 London wheat was GBP2.45/tonne lower, with Nov 13 Paris wheat EUR1.50/tonne higher and Nov 13 Paris rapeseed EUR0.75/tonne firmer. London wheat took a hit from a strong pound. Sterling posted its best monthly gain against the euro in a year last month, and has added a further 1.2% to those gains this week to hit a 7 1/2 month high above 1.19 against the single currency today.

Toepfer estimated the UK wheat crop at 12.47 MMT, a 6% reduction on last season but better than many had expected earlier in the year. Given the large volume of imports in 2012/13 (and more are already lined up for 2013/14) the carry-in of old crop into new has also been much larger than many anticipated.

This still leaves the UK with an exportable surplus this season, yet Nov 13 feed wheat at GBP155.05/tonne is the equivalent of EUR183.40/tonne, less than five euros under the price of Paris milling wheat. That explains why out of the near 4.5 MMT of soft wheat export licences issued by Brussels so far this year the UK has only applied for 3,600 MT two months into the season. Even last year we exported 737 TMT of wheat.

Feed barley at farm level meanwhile is only fetching GBP130/tonne, and we will of course have a much larger crop of that than normal this year.

For now though, UK growers are generally busying themselves wrapping up the last of the harvest and making preparations for sowing winter crops for 2014. All the problems with winter OSR last year may see less of that get planted this year, and whilst GBP155/tonne for wheat might not appear too attractive when looking into the rear view mirror, it's better than GBP130/tonne for barley, so winter wheat plantings for the 2014 harvest should be higher. At least soil conditions look a lot better than they did 12 months ago.

In other news, FranceAgriMer raised their forecast for the 2013 soft wheat crop there to 36.68 MMT, up 3% on last year and above their previous estimate of "in excess of 36 MMT" released last month. It's also a bit higher than the French Farm Ministry's 36.1 MMT, and getting closer to trade forecasts of 37.0-37.5 MMT.

They also released their first estimate for 2013 French corn production, forecasting a crop of 15.6 MMT, a 2% rise on last year. They trimmed their French barley crop estimate slightly from 10.6 MMT to 10.5 MMT, a near 8% drop on last year due to reduced plantings and lower yields. Separately they left their crop condition ratings for the 2013 corn crop unchanged from a week ago at 55% good/excellent.

Egypt bought one cargo of Romanian milling wheat at USD251/tonne FOB (around GBP160.50/tonne equivalent) plus freight at USD12.69/tonne for early Nov shipment. Romanian trade association ARCPA said that wheat yields were up more than 50% on last year.

The USDA attaché in Cairo said that recent Egyptian purchases (2 MMT) mean that they've now got enough wheat bought to last them through to Jan 2014.

The Ukraine Ministry increased their forecast for their 2013/14 grain harvest from a record 57.1 MMT to "nearly" 58 MMT. Exports to date this season stand at 4.1 MMT, including 2.2 MMT of wheat, 1.4 MMT of barley and 0.6 MMT of corn. They'd like to export 30 MMT or more of that crop this season, although logistics remain a major challenge. Once winter hits hard that will also provide them with another hurdle to get over.

Russia's harvest now stands at 63.9 MMT off 58.9% of the planned area. Wheat accounts for 40.8 MMT of that, with yields so far averaging 42% more than last year at 2.73 MT/ha. With over 40% of the wheat crop still to be harvested current trade estimates for final production of around 52 MMT could prove to be on the low side even though spring wheat yields will obviously be lower.

The Siberian presidential envoy was recently quoted as saying "I think that the harvest will be close to a record, above average that's for sure."

The Kazakhstan harvest meanwhile currently stands at just over 4 MMT off 21% of the combinable area. That also suggests that the current Ministry forecast for production of only 15 MMT this year may also be understated.