USDA Data Tips EU Wheat Over The Edge

10/01/14 -- EU grains traded mostly lower, with wheat under particular pressure from a bearishly construed USDA report released late in the session.

Jan 14 London wheat closed GBP1.30/tonne easier at GBP154.50/tonne and new crop Nov 14 ended the day setting another new lifetime contract lowest ever close, down GBP2.00/tonne at GBP145.25/tonne.

Jan 14 Paris wheat finished EUR4.50/tonne easier at EUR194.75/tonne, Mar 14 Paris corn closed EU0.50/tonne higher at EUR171.50/tonne, whilst Feb 14 Paris rapeseed fell EUR1.75/tonne to EUR356.75/tonne.

For the week Jan 14 London wheat shed GBP6.45/tonne and Nov 14 lost GBP4.85/tonne. Jan 14 Paris wheat slumped EUR13.25/tonne, going off the board today, whilst Mar 14 Paris corn lost a euro and Feb 14 Paris rapeseed surrendered EUR9.75/tonne.

Brussels issued 719 TMT of EU soft wheat export licences this week, to add to the near 1 MMT granted across the festive fortnight, taking the cumulative volume so far this season to 15.1 MMT, almost 50% up on a year ago.

French soft wheat exports in November were 1.3 MMT, of which more than 800 TMT went to non-EU destinations (and more than 50% of that went to Algeria). That takes Jul/Nov soft wheat exports to 6.9 MMT, an increase of 12% versus the same period in 2012/13.

The Russian Ministry said that more than 95% of winter grains there are in good/satisfactory condition, even better than Ukraine's 92%. There is continued market chatter though that the incredibly mild weather that both countries have been experiencing does mean an acute lack of snow cover, placing crops at risk from a sudden deep freeze, should one occur.

"High amplitude waves in the jet stream would be rearranged next week, leading to much colder conditions than previously. Not only Europe but also Russia is expecting much colder weather with a deepening trough in the jet stream," say Martell Crop Projections.

"Saratov, Russia, would go from 36 F today to only 17 F on Wednesday, January 15. In Poland temperatures are expected to decline 15-20 degrees from mid 40's F today to upper 20's F next week. It is however drought, not cold, that poses the greatest threat to wheat in European Russia," they suggest.

India's Ag Commissioner said that the country's wheat harvest could reach an all-time high 100 MMT this year (versus 92.5 MMT in 2013), forecasting the planted area at a record 31 million hectares versus 28.6 million a year ago. The Indian government have increased the price that they will pay local farmers for wheat by 3.7% this year to INR1,400 per 100kg, or around USD226-GBP137/tonne to encourage plantings in an election year.

The Indian government have now begun selling new crop wheat this week, securing their first deal for Apr/May shipment at USD270/tonne FOB.

Late in the day the USDA pulled the rug from underneath an already shaky wheat market by increasing the size of the global crop from the record 711.4 MMT forecast last month to a new all-time high 712.7 MMT. World wheat consumption was cut by a little over 1 MMT to 703.4 MMT, taking ending stocks from 182.8 MMT to 185.4 MMT, 5.3% more than in 2012/13. The trade was expecting a small reduction in global wheat inventories.

That little lot, which included a surprise rise in US wheat ending stocks in 2013/14, sent US wheat markets sharply lower and dragging Europe down with them at the close of play.

It will be interesting to see how the European market reacts on Monday after traders have had the chance to pour over the minutiae of the report over the weekend.

The data dished up by the USDA included another rise in EU-28 wheat exports, up from 25 MMT to a record 26 MMT (and 15% higher versus 22.6 MMT in 2012/13). There was also a small downwards revision to the EU-28 2013 wheat crop to 142.9 MMT, although consumption here was also forecast to decline by 1 MMT from last month to 119.75 MMT.