EU Grains Slip Heading Into USDA Report

10/12/13 -- EU grains closed mostly lower, with the exception of malting barley, heading into the December world supply and demand numbers from the USDA, which only came out just as our markets were wrapping up.

The session ended with Jan 14 London wheat down GBP1.60/tonne at GBP162.80/tonne, Jan 14 Paris wheat was EUR3.25/tonne easier at EUR205.75/tonne, Jan 14 Paris corn was down EUR2.50/tonne at EUR177.00/tonne and Feb 14 Paris rapeseed slumped EUR6.50/tonne to EUR365.25/tonne.

This was the first time that a front month on London wheat had closed outside of the recent narrow trading range of GBP163-166/tonne since mid-October.

The trade was expecting that a possible 1 MMT decrease in wheat production in Argentina would be more than offset by rises for Australia and Canada this afternoon's USDA report.

Stats Canada stunned the market last week by projecting the all wheat crop there at a record 37.5 MMT, which is far higher than the USDA's November estimate of 33.2 MMT and 38% up on a year ago.

That was followed by a FAO forecast for a global all wheat crop of 711 MMT in 2013/14, which is 5 MMT more than the USDA said last month despite it containing a relatively low ball estimate for Canada of "only" 34.9 MMT.

Japan bought 111,173 MT of western red spring Canadian wheat in a tender today. They are reported to have been buying Canadian Spring Wheat in preference to the more expensive US Dark Northern Spring variety of late.

They are said to have bought almost 900 TMT of the former during the Apr/Nov period, an increase of 40% on last year. In contrast purchases of US Dark Northern Spring wheat are down by a third in the same period to less than 600 TMT.

Ukraine said that it's 2013/14 marketing year to date grain exports (Jul 1-Dec 9) were up 20% on last year at 15.353 MMT. Corn is now the leading grain being exported (7 MMT), followed by 6.3 MMT of wheat and almost 2 MMT of barley. The Ag Ministry recently increased their forecast for full season grain exports to 32.5 MMT, up more than 40%, or nearly 10 MMT, on 2012/13.

Russia and Ukraine have both seen an exponential jump in corn production in recent years, a trend that looks set to continue into 2104 and beyond, as growers adopt more Westernised agronomy methods and plant higher yielding hybrid varieties much more extensively.

The Russian Ministry said that they expect this year's corn planted area of 2.1 million hectares to grow to 5 million ha by 2020, when they hope to be harvesting a crop of 25 MMT. Annual production was only 3 MMT as recently as 2010.

Ukraine's corn crop is expected to be close to 30 MMT this year, treble the volume produced only a few years ago. Exports meanwhile are seen up 360% in the past 3 years.

Russia bought 22,680 MT of grains for its intervention fund today, taking the total purchased so far this year to just under 466 TMT. The Russian corn harvest is 89% complete, producing a record crop of 11.3 MMT. Yields are averaging an all time high of 5.29 MT/ha.

In their review of the 2012/13 crop year the EU Commission's MARS unit said: "On balance, the EU-28 yields for cereals are favourable and well above both last year’s levels and the five-year average. For soft wheat as well as durum wheat, yields at EU-28 level are close to the five- year average, mediocre yields in France and the UK for soft wheat are offset by good yields in Hungary, Bulgaria and Germany."

"Rapeseed yields are close to the five-year average, as low yields in France and the UK are compensated by those of Germany, Poland and the Czech Republic," they added.