EU Wheat Up As US Crop Conditions Fall Sharply

04/02/14 -- EU grains finished higher as Stats Canada provided the market with a "is the glass half full, or half empty" sort of a moment. It might be difficult to see how a 38% hike in Canadian wheat stocks is bullish, except when you consider that the market was expecting the figure to come in even higher.

Things closed with Mar 14 London wheat ending up GBP2.50/tonne at GBP153.50/tonne, whilst new crop Nov 14 London wheat ending GBP1.70/tonne firmer at GBP145.25/tonne. Mar 14 Paris wheat was EUR2.25/tonne steadier at EUR194.25/tonne, Mar 14 Paris corn was up EUR1.00/tonne to EUR174.00/tonne, whilst May 14 Paris rapeseed jumped EUR7.00/tonne higher at EUR371.50/tonne - the highest close on the front month continuous chart since Dec 9.

It may simply be that the Canadian news was enough to spark a bit of short covering in CBOT wheat, which spilt over into European trade. Friday's commitment of traders report shows trend following funds (noncommercials net of Index Funds) were short 96,005 contracts on CBOT wheat, close to the record of 103,996 contracts, as of last Tuesday night.

Dec 31 Canadian wheat stocks of 28.4 MMT were half a million below expectations, although sharply higher than 20.6 MMT a year previously.

Canadian barley stocks were also higher than a year ago, but below expectations. Canola stocks beat both however, coming in at 12.6 MMT versus the 12.3 MMT expected and 8.1 MMT a year previously.

A more significant deal, as far as wheat is concerned, was probably the latest monthly update on crop conditions in the US. They showed winter wheat in Kansas only rated 35% good/excellent at the end of January. A month ago that figure was 58% and at the end of November, when the USDA stopped issuing weekly crop condition reports, Kansas wheat was heading into winter dormancy rated 63% good/excellent. There was a similar fall from grace for wheat in Oklahoma, down to 36% from 63% at the turn of the year and 77% at the end of November.

Another freeze is on the way for the region this wek, once more raising winter kill fears for wheat without any snow covering.

Russia only managed to pick up less than 5,000 MT of wheat in it's regular twice weekly intervention purchase. The Russian rouble is another global currency to hit the skids lately, down to its lowest since March 2009 versus the US dollar. This appears to be making selling for export more attractive, hence the recent poor showing achieved at the government's intervention buying rounds since the turn of the year. Exports might pick up on the back of it though, when the weather improves at least.

Reuters reported that Russia had around 3.4 MMT of wheat left to export in 2013/14, having shipped 12.9 MMT so far this marketing year (to Jan 19).

The Ukraine Ministry said that 58% of the nation's winter crops are in good condition, 34% are satisfactory and 8% weak/thinned. The worst affected regions are said to be Kharkov (16% weak/thinned), Zaporozhe (12%) and Kherson (11%).

Separately, the local Dept of Agriculture in the Sumy region said that 25% of winter grains had suffered damage due to series of hard and lingering frost and lack of adequate protective snow cover.

The Ukraine Ministry said, in their first tentative projection for 2014, that the country would produce 62.1 MMT of grains this year - a small 1.4% decline on last year.

They estimate the 2014/15 Ukraine wheat crop at 21.2 MMT (down 1%), with corn production seen 2.2% lower at 30.2 MMT and this year's barley crop up by 10% to 8.3 MMT - presumably as a result of increased spring plantings (you will recall that not all the intended winter grain area got into the ground back in the autumn).

They also estimated the 2014/14 Ukraine rapeseed crop at 2.1 MMT, down 12.9%, with the sunflower crop at 9.3 MMT, down 15.4%.