EU Grains Little Changed After A Choppy Week
10/10/14 -- EU grains ended the day mixed, and with overall little change at the end of a fairly choppy week.
The day ended with Nov 14 London wheat up GBP0.45/tonne to GBP112.75/tonne, Nov 14 Paris wheat closed EUR1.50/tonne higher at EUR158.75/tonne, Nov 14 Paris corn was up EUR1.50/tonne to EUR140.75/tonne, whilst Nov 14 Paris rapeseed was EUR2.25/tonne easier at EUR324.00/tonne.
For the week London wheat managed a GBP1.25/tonne gain, with Paris wheat up a quarter of a euro, corn down three quarters and rapeseed down one.
Egypt's GASC were back in the market, tendering for wheat for Nov 11-20 shipment. They finished up buying two cargoes (120 TMT) of French and one (55 TMT) of Russian wheat. French wheat was priced around $6/tonne cheaper than the Russian wheat on a cost and freight basis, even with a freight disadvantage.
They've now bought 5.46 MMT of wheat on the international market so far this marketing year. They say that they've also purchased 3.7 MMT on the domestic market.
So we now know that French wheat is still the most competitive origin around, which is fortunate whilst they have so much of it.
The credibility of the MATIF contract took another blow with the Socomac silo in Rouen saying it was 90% full and was temporarily suspending the intake of wheat. The only other current delivery point against the contract, the Senalia silo, already hung up the "full" sign in September.
If the situation stays like this then anyone short of Nov 14 Paris wheat and intending to make a delivery against their contract would find it physically impossible to do so. It could be that they would then therefore be forced to close out the contract in the market, which may falsely support the Nov 14 contract in the remaining 4 weeks of trade between now and when the contract expires on Nov 10th.
It could also widen the gap between the futures and physical markets, the wheat that the short was intending to deliver is still there and is now looking for a new home after all.
The Nov 14 MATIF contract currently carries an open interest of well over 100,000 lots, which is more than 5 MMT. Even if Socomac were to squeeze in that extra 10%, and at the moment they are not even saying that they could, that's only enough room to allow for 340 contracts to be delivered against the Nov 14 position.
Back home, Defra pegged the UK 2014 wheat crop at 16.6 MMT, a 39% hike on last year's output, and the largest since the record 17.2 MMT crop of 2008. (Incidentally, on this day in 2008 London wheat was closing below GBP90/tonne for the first time for a front-month since September 2006). Defra also estimated the UK barley crop at 7.0 MMT, which is barely changed from 7.1 MMT a year ago, despite a 14% drop in plantings in England and a 4% decline in Scotland.
Late in the day the USDA released their latest World Supply and Demand estimates. They upped the size of the 2014 EU-28 wheat crop by 3 MMT from last month to an all time high 154 MMT, up 10.8 MMT or 7.6 percent from last year.
"Harvesting is now finished in the EU and production is being revised upward. Rain during the wheat’s grainfill stage in June and July greatly boosted yields, turning a crop that had been moisture deficient into a bin-buster, albeit with quality issues," they said.
They also increased the size of this year's EU barley crop to 59.3 MMT, up 2.3 MMT or 4 percent from last month, and down only a relatively modest 0.4 MMT or 0.6 percent from last year.
For the record, they put the UK wheat crop at 16.6 MMT, with barley output at 6.5 MMT and the 2014 OSR harvest at 2.57 MMT.
