London Wheat Ends Lower As Paris Takes Day Off
01/05/14 -- French markets were closed today for the May Day holiday, along with much of the rest of the world, although London and Chicago stumbled on. That brought thin trade, but not the general lack of movement that you might expect.
Yet again though, on a day like this fresh news was at something of a premium.
It took until lunchtime to register it's first trade, but the day ended with May 14 London wheat down GBP1.95/tonne to GBP166.50/tonne, and with new crop Nov 14 London wheat closing GBP0.80/tonne lower at GBP157.25/tonne after the Chicago daytime session took a turn for the worst in afternoon trade.
The US wheat crop is looking pretty sick in Oklahoma, Kansas and Texas. There is little doubting that. However, the market should maybe consider just how important that really is in the overall scheme of things for wheat.
The US produced "only" 8% of the global wheat crop last year (as opposed to 36% of the world's corn), with Kansas, Oklahoma and Texas accounting for a combined 23% of total 2013/14 US all wheat production.
Let's say we peg production across the board in those three states down by 20% this year, that "only" equates to a reduction in world supplies of less than 3 MMT for 2014/15. What's that between friends? A return to "normal" in little old Blighty alone should redress that imbalance come harvest time.
Note too, that although MDA CropCast trimmed their forecast for the US wheat crop today by 0.5 MMT from last week, output of 57 MMT is only down 1.7 MMT on last year - that's less than the production of Tunisia.
Tunisia incidentally yesterday said that they are expecting this year's grain harvest to total 2.2 MMT, a sharp more than 80% rise on output last year, after decent rains during grain filling.
In other news, Brussels announced last night that they'd issued 448 TMT of soft wheat export licences this past week, bringing the year to date total to a record 25.1 MMT. As wheat continues to leave however, corn keeps coming in to replace it. Corn import licences almost matched those for wheat exports, totalling 420 TMT this week.
Meanwhile the EU also awarded the first batch of duty free wheat imports to Ukraine, under a new deal that affords Kiev preferential treatment to export us 950 TMT of wheat/flour tariff-free between now and the end of October.
On the European crop front, things are looking promising. "Satellite imagery reveals strong improvement in crop vegetation between April 1 and month end in Europe’s three top wheat nations of France, Germany and United Kingdom. Increased rainfall and moderating temperatures have contributed to the better vegetation. Warm sunny days and cool nights in Western Europe have also been beneficial for developing wheat the past 2 weeks," say Martell Crop Projections.
"Generous rainfall has not been confined to Western Europe. Strong showers have also developed recently in Eastern Europe, improving the wheat potential in Poland, Romania and Bulgaria too," they added.
In an unusual move, Syria are tendering to sell 200 TMT of wheat to Iran, despite the fact that the former probably need it more than the latter. I wonder what the Syrian government will spend the money on? Sanitation, health, education? I somehow suspect not.
