London Wheat Stages Surprise Late Turnaround

27/10/14 -- EU grains closed mostly higher, having spent a large part of the day lower, with London wheat in particular playing catch-up with Friday night's sharp losses seen in Paris and Chicago.

The day ended with Nov 14 London wheat up GBP0.65/tonne to GBP120.45/tonne, Nov 14 Paris wheat closed EUR0.75/tonne lower at EUR165.00/tonne, Nov 14 Paris corn fell EUR0.75/tonne to EUR143.75/tonne, whilst Nov 14 Paris rapeseed was down EUR0.50/tonne to EUR322.50/tonne.

Today was the first tender day on the Nov 14 London wheat contract, in a tender period with 4 weeks left to run. There were over 1000 lots tendered for delivery, which is the majority of the open interest in the contract. That doesn't suggest that end-users are queueing up to buy UK wheat, so traders are thinking let the futures market have it instead.

Meanwhile, there's still an open interest against the Nov 14 Paris wheat contract of in excess of 30,000 lots, and that contract expires in just two weeks! With delivery seemingly not an option, as the futures stores in Rouen are still closed for intake, some fun and games look likely in that contract between now and Nov 10.

Fresh news was relatively thin on the ground, as is often the case on a Monday. Today's early price action could probably be attributed to a feeling that the market has gone up "too much, too quick" with London wheat up around 11.5% and Paris wheat gaining more than 13% from the lows set only around 4 weeks ago.

However, late in the day strength in soybeans and meal when the US markets opened spilled over into the grains, sending London wheat up to close on the highs of the day in what it has to be said looks like a bit of a false close.

The EU Commission's MARS unit tweaked their estimates for grain yields here in Europe this year, although most of the changes were only relatively minor.

Average 2014 EU soft wheat yields were trimmed from the 5.88 MT/ha forecast a month ago to 5.87 MT/ha, although that's still up versus 5.82 MT/ha a year ago and 5.4% above the 5-year average. Winter barley yields were also reduced from September's 5.61 MT/ha to 5.57 MT/ha, and those for rapeseed shaved from 3.33 MT/ha to 3.32 MT/ha. Corn yields were left unchanged at 7.59 MT/ha.

"Summer crop yields at EU-28 level are high and maize yields in Romania, Hungary and Bulgaria are forecast more than 25 % above the five year average," they noted.

One area of slight concern is Ukraine, where the grain maize yield "is forecast to be below the long-term trend (albeit close to the 5-year average), due to the dry and warm weather observed this summer." Corn yields in Ukraine were forecast at 5.7 MT/ha versus the 5.81 MT/ha predicted a month ago and last year's bumper 6.4 MT/ha.

Conversely, spring wheat and barley yields in Russia are expected to be at "near-record" levels, they said.

Kakzakhstan said that they'd harvested 16.2 MMT of grains so far this year, off 13.1 million hectares, or 87.5% of plan. The Ag Ministry forecast a final bunker weight crop of 17 MMT, down 6.6% versus 18.2 MMT a year ago. In clean weight that means around a 15.5 MMT crop, up from the 14-15 MMT output forecast previously, they said.

The country's grain exports in 2014/15 will fall to 8 MMT from 8.7 MMT a year ago, they also estimated.

Bangladesh signed deals to buy 250 TMT of Ukraine corn in an inter-governmental trade.

The latter's exports are holding up well, although wheat shipments are slowing. The country's seaports shipped out 673 TMT of grains last week, only slightly down on the 689 TMT exported the previous week. Wheat accounted for 212.5 TMT of the total, with barley 378.9 TMT and corn 81.6 TMT, said APK Inform. In percentage terms that gives wheat around a 32% share of last week's export total, versus 50% the previous week and 77% for the week prior to that.