EU Wheat Falls As Bearish Data Mounts

Posted by Nogger - a legend in his own mind at 19:20 | Categorized as

05/12/13 -- EU grains closed lower across the board, with bad news for wheat coming thick and fast this week it's been pretty impressive to see Paris wheat post its best close since May yesterday - even with EU exports holding up very well.

The session ended with Jan 14 London wheat down GBP0.95/tonne at GBP164.25/tonne, Jan 14 Paris wheat was EUR1.25/tonne easier at EUR211.75/tonne, Jan 14 Paris corn was down EUR1.50/tonne at EUR180.50/tonne and Feb 14 Paris rapeseed fell EUR0.575/tonne to EUR377.50/tonne.

We've already had ABARES increase the size of the Australian wheat crop to levels well above those expected by the trade on Tuesday, followed by Stats Canada doing likewise yesterday. Today we had further bearish news in the form of the FAO raising their forecast for the world wheat crop in 2013 to a record 711 MMT from 708 MMT previously and up 7.7%, or 51 MMT, on a year ago.

There were increases also for global corn and soybean production. The world cereal crop was estimated at an all-time high of almost 2.5 billion tonnes (including milled rice), up 8.4% on a year ago and 6% above the previous global record output achieved in 2011. Ending stocks were forecast up 68 MMT, or 13.4%, at 572 MMT which is 9 MMT more than a month ago.

It is also worth noting that these figures were formulated using a Canadian wheat crop of "only" 33.2 MMT and an Australian one of 24.5 MMT - both figures being significantly lower than this week's latest updates from Stats Canada (37.5 MMT) and ABARES (26.2 MMT). That may indicate that the FAO's next forecast (not due now until February) could be even higher.

They pegged the EU-28 wheat crop at 143.3 MMT, similar to the USDA's current forecast, and 7.3% more than a year ago.

Further bearish news today came from the USDA reporting weekly US wheat export sales at a marketing year low of only 229,200 MT versus the 450-550 TMT that the trade was expecting.

HSBC said that the price of UK wheat could fall to GBP150/tonne next year. A year ago they correctly forecast that UK wheat prices would fall to GBP165/tonne in 2013 (in fact as we now know they fell close to GBP150/tonne), at a time when you could have sold the Nov 13 and Jan 14 futures short in the GBP190-200/tonne region.

Ukraine's grain harvest is almost over at 99% done, producing a record near 63 MMT crop to date. That includes a record 29.3 MMT of corn off 97% of plan.