London Wheat Extends Losing Run To Nine Straight Sessions

16/05/14 -- EU grains were mixed to end the week, with old crop London wheat extending its unbroken run of falling every day since Bank Holiday Monday on May 5th. Paris wheat had also fallen in every session since then, but managed to post a small gain at the close today, although now that the May 14 contract has expired, it's new crop Nov 14 that is the front month there.

The day ended with May 14 London wheat closing down GBP1.05/tonne at GBP151.70/tonne, and new crop Nov 14 London wheat GBP0.25/tonne lower at GBP149.00/tonne. Nov 14 Paris wheat closed EUR0.25/tonne higher at EUR199.25/tonne, Jun 14 Paris corn was down EUR0.50/tonne at EUR177.50/tonne and Aug 14 Paris rapeseed ended the day EUR0.75/tonne higher at EUR360.00/tonne.

For the week May 14 London wheat slumped GBP9.75/tonne, whilst Nov 14 was down a slightly more modest GBP7.15/tonne. Nov 14 Paris wheat fell EUR8.00/tonne, Jun 14 Paris corn was down EUR6.75/tonne and Aug 14 Paris rapeseed was EUR1.00/tonne higher.

Old crop London wheat has now virtually given up all the gains put on in February and March that followed Russia's annexation of Crimea. It has also surrendered the large premium that it held over new crop. Just a month ago today May 14 traded at a premium of more than GBP10/tonne to the Nov 14 contract and (even just 2 weeks ago the difference was almost GBP9/tonne) and tonight that differential is only GBP2.70/tonne.

European crop conditions largely look very good, with the warm dry spell forecast for the weekend and early next week likely to be of benefit. Rain returns by the middle of next week, and the 15-day forecast predicts above average precipitation for just about the entire continent, including some of the drier areas of Spain and France.

FranceAgriMer reported that 44% of the French winter wheat crop is now heading, up from 18% a week ago and well ahead of only 6% this time last year. The entire French winter barley crop meanwhile is headed, compared to only 38% of it a year ago, and even 4% of the spring barley crop is heading against 1% this time in 2013. They said that 89% of the spring barley crop is displaying an ear of at least 1cm versus only 39% a year ago.

French corn planting meanwhile is 92% complete compared to 77% this time last year, and 79% of the crop is "lifting" compared to 46% in 2013.

FranceAgriMer said that 73% of the winter wheat crop is in good/very good condition, unchanged on a week ago and 6 points better than a year ago. Winter barley rated good/very good was also unchanged at 70%, 3 points ahead of this time last year.

Spring barley is 70% good/very good, up a point on last week, although less than 79% a year ago. The French corn crop is rated 91% good/very good versus only 72% at this date in 2013.

Brussels issued more corn import licences (448 TMT) than it did wheat export ones (424 TMT) for the second week running. Wheat exports authorised to date total 25.7 MMT against 17.4 MMT this time a year ago. Corn imports are at 12.7 MMT versus 9.85 MMT in 2012/13.

Egypt's GASC bought just one cargo of Ukraine origin wheat in it's tender. The price paid was said to be $289 plus $13.49 freight. French wheat was reportedly offered at $290.87, and US wheat $282.87 - although much higher freight ruled out the latter. There weren't many offers in this tender, which may be down to the fact that the Jun 20-30 shipment period falls awkwardly between old and new crop. It may also show trader reluctance to offer to Egypt specifically after some reported problems with Letters of Credit recently.

The Ukraine Ministry said that spring grain plantings there were complete on 7.418 million hectares, or 89% of plan. That's less than 7.978 million ha this time last year. The planted total includes 4.582 million ha of corn (also 89% of plan).

Will all the intended area get sown? Currently most analysts seem to think so, although inputs of fertiliser and pesticides will probably be reduced due to credit issues. The same financial problems may however also make Ukraine growers even more "needy" sellers at harvest time than normal.

Russia has planted 17.1 million hectares of spring grains (53.5% of plan), which is 2.6 million more than a year ago. That includes 4.5 million ha of wheat (34.4%), 6.4 million ha of barley (73.8%) and 2 million ha of corn (79.2%).

Whilst Ukraine has picked up decent rains in the past month, Russia has not. The forecast for the former remains beneficial for most of the country except the far east. All but the south of Russia though is forecast to remain hot and dry for the next two weeks.

The latter situation certainly merits watching, as the unusual heat and dryness being experienced now is already being compared to the great drought of 2010. That pushed the price of London wheat up by GBP50/tonne during the month of July, and prices added a further GBP50/tonne between then and the end of the year.