EU Wheat Markets Tumble
12/05/14 -- EU wheat markets finished the day sharply lower, with May 14 London wheat closing down GBP2.45/tonne at GBP159.00/tonne, with new crop Nov 14 London wheat GBP2.65/tonne weaker at GBP153.50/tonne and expiring May 14 Paris wheat EUR5.00/tonne lower at EUR202.25/tonne. Jun 14 Paris corn was down EUR1.25/tonne at EUR183.00/tonne, whilst Aug 14 Paris rapeseed rose EUR0.25/tonne to EUR359.25/tonne.
Wheat was playing catch up with a US market that closed around 12 cents lower on Friday, and traded with similar follow through losses for much of the day today.
Friday night's USDA report essentially said that despite a drop in world wheat production in 2014 from last year's record, global supplies are ample and that ending stocks in 2014/15 will rise for a second year to 187.4 MMT. A world corn crop that will match last year's record 979 MMT will see ending stocks in 2014/15 rise for a fourth year in a row to 181.7 MMT, they forecast.
The EU will consume a record 76 MMT of corn in 2014/15, imports of which will match this season's 13 MMT, they said.
In a special report on Ukraine, the USDA said that winter crop conditions are "better than last year and better than average".
Still, wheat yields were forecast down 6.4 percent from last year and 3.6 percent below the 5-year average due to the likely reduction in the application of mineral fertilisers and the use of plant-protection chemicals, they said.
That gives Ukraine a 20 MMT wheat crop this year versus 22.3 MMT in 2013. Exports will decline by 1 MMT year on year to 8.5 MMT. Ukraine's corn crop will fall from last season's record 30.9 MMT to 26 MMT, although that's still the second highest ever, with exports dropping from a record 19 MMT this season to 16 MMT in 2014/15. Again that is the second largest level of Ukraine corn exports in history.
Ukraine seaports exported 340 TMT of grains in the past week, said APK Inform. That was down 9% from the previous week and included 180 TMT of wheat and 108 TMT of corn.
They estimated the Russian wheat crop at 52 MMT, similar to last year and the same as the USDA forecast on Friday. They said that wet weather in the autumn cut winter wheat plantings by 6.8% to 11.5 million hectares, and that spring wheat plantings will rise 5% to 13.4 million ha. The larger proportion of spring sown wheat means that average yields will fall slightly for the 2014 harvest to 2.18 MT/ha, they said.
Thankfully, we are expected to do much better than that here in the UK this year. The USDA estimated average UK wheat yields of 7.77 MT/ha on Friday. That would be the best since 2010, although the competition in recent seasons has hardly been stiff.
With UK wheat crops looking generally very good indeed, it may be worth considering that between 2000 and 2010 the average UK wheat yield was 7.85 MT/ha, and yields topped 8 MT/ha five times during that period. Achieving that sort of level again would take the UK wheat crop to around 16 MMT this year (versus the 15.15 MMT now forecast by the USDA), which would be an increase of around 34% on a year ago.
The UK rapeseed crop is also looking magnificent, and the USDA's forecast average yield of 3.44 MT/ha could also prove to be on the low side come harvest time.
It seems like it's been such a long time since we've had a bumper harvest, that we've forgotten what it's like. After the poor results of the past few years, growers have been particularly cautious about over committing themselves on forward sales for new crop this year.
The possible combination of a return to the halcyon days of the "noughties" yields and an unusually large proportion of new crop being unsold suggests lower prices might lie ahead. No matter what the size of the Ukraine crop, and this year's doesn't look like being a disaster at all, they will be their usual aggressive sellers come harvest time too.
Putin and spec money might be the bulls best hope, although hope isn't much of a marketing strategy.
