EU Wheat Rebounds From Tuesday Losses

11/12/13 -- EU grains closed generally a little higher, rebounding from yesterday's slump following a bearish USDA report. Egypt bought EU wheat in a tender, also supporting the market.

Jan 14 London wheat ended up GBP1.75/tonne at GBP164.55/tonne, and Jan 14 Paris wheat finished EUR0.75/tonne firmer at EUR206.50/tonne, Jan 14 Paris corn closed unchanged at EUR1.0077/tonne, whilst Feb 14 Paris rapeseed rose EUR3.75/tonne to EUR369.00/tonne.

The euro rose to a 3-week high against the pound and a 6-week high versus the US dollar, capping potential wheat gains across the Channel today.

Nevertheless, Egypt bought 300 TMT of wheat in a tender for Jan 10-20 shipment, of which 180 TMT is to come from Romania, with a further 120 TMT being French origin. The market can't work out if it's good news that they bought all EU origin, or if it's bad news that Romania is still in there pitching after last week's "purchase" was aborted.

Either way, EU wheat exports remain at a brisk pace.

The French Farm Ministry forecast soft wheat exports in 2013/14 at 18.95 MMT, up from their previous estimate of 18.26 MMT and versus 17.2 MMT in 2012/13. They said that 11.8 MMT of this total will go outside of the EU-28 versus 11.2 MMT previously.

Russia bought 19,575 MT of grain for it's intervention fund today, bringing the total bought so far this season to 485,460 MT of mostly wheat (71,820 MT is barley). They look set to fall well short of their intention to rebuild their intervention stocks by 203 MMT this year.

Ukraine has now harvested 99% of its 2013 grain harvest, producing what is easily a record 63.2 MMT to date. Average yields are 4.02 MT/ha, up 27% on last year's 3.17 MT/ha. Corn accounts for 29.57 MMT of that total, off 98% of plan.

Now that we have the USDA report out of the way the market looks like consolidating into year end. Where we go in the early part of 2014 will be interesting.

Some suggest that the current spell of book-squaring and profit-taking on corn will be over by then, and that fund money may be looking to establish/build on existing short positions. That could pressure wheat down further if that's the case.

India will be harvesting new crop wheat by the end of March, and southern US states won't be too far behind that, so there is certainly some downside potential in the first half of 2014 - especially of winter wheat in Europe and the FSU emerges from dormancy in decent condition.

Current pricing structure would appear to indicate that US spring wheat plantings could steal a few acres off corn too.

Demand from Brazil (and maybe China too) could help fashion price direction early in 2014. The latest vibe seems to be that Brazil's wheat crop may be higher than anticipated (and so too might be Argentina's - normally Brazil's largest supplier).