London Wheat Slumps To Fresh 6-Month Lows, Yet Rapeseed At One-Year Highs

20/04/15 -- EU grains closed mixed to start the week, with Paris markets generally firmer, and London wheat lower as the pound rose versus the euro.

At the finish, May 15 London wheat was down GBP0.75/tonne at GBP114.55/tonne; May 15 Paris wheat was unchanged at EUR182.75/tonne; Jun 15 Paris corn was down EUR0.25/tonne at EUR162.50/tonne; May 15 Paris rapeseed was EUR1.75/tonne higher at EUR375.75/tonne.

For London wheat this was the lowest close for a front month since 13 Oct last year. In contrast it was the highest close for a front month on rapeseed since the May 14 contract went off the board on the last day of April 2014.

The reason for the latter may have been FranceAgriMer forecasting French 2014/15 ending stocks at just 83 TMT on 30 Jun. French exports in the current season were raised from 1.275 MMT to 1.36 MMT.

Egypt's GASC took advantage of the recent price drop, buying 300 TMT of wheat over the weekend, consisting of three 60 TMT cargoes of French material and one each of Romanian and Russian origin for June 5-15 shipment.

The prices paid were between $219.50/tonne to just over $223/tonne on a C&F basis.

The cheapest origin was France, which was pitched at around $206.00-208.50/tonne FOB, with Romanian wheat at $212.50/tonne and Russian origin just shy of $214.00/tonne. Although the Russian material was the dearest, on both an FOB and C&F basis, it was interesting nevertheless to see it booked and in the ballpark given the hugely punitive export duty that exists for that period.

Bloomberg reported that the Russian Ministry are looking at ways to "eliminate (the) inordinate appetite of a number of grain traders and their patrons” from aggressively exporting Russian grains, prioritising domestic needs first.

Bangladesh were also said to have bought 50 TMT of French origin wheat in a tender, whilst Pakistan purchased 40 TMT of Ukraine rapeseed. Jordan are tendering for 100 TMT of wheat for Dec/Jan shipment.

APK Inform said that Ukraine's seaports exported 299 TMT of grains last week, down from the near 450 TMT shipped out the previous week. Corn accounted for 74% of last week's volume (221.7 TMT), with wheat the remaining 26%.

The Ukraine Ministry said that the country had now exported 27.7 MMT of grains this season, including 13.42 MMT of corn, 9.83 MMT of wheat and 4.26 MMT of barley.

Russian seaports exported 203 TMT of grains last week, down from the near 329 TMT shipped out the week prior to that. Last week's volume included 142.2 TMT of wheat, 24.5 TMT of corn and 36.1 TMT of barley, APK Inform said.

Agritel said that new crop grain prices FOB the Black Sea are less than $200/tonne for 12.5% milling wheat, with barley around $20/tonne cheaper than that and corn a further $10/tonne below those levels. That's the equivalent of circa GBP134/tonne for the milling wheat, under GBP120/tonne for barley and less than GBP114/tonne for corn.

The price differential between old and new crop London wheat remains historically high at over GBP10/tonne, providing those many carrying old crop with something of a "comfort blanket" that they are doing the right thing.

"Is the UK feed wheat market at risk of carnage?" the HGCA asked last week. With "how much wheat do farmers have to move before harvest" being the big question. Storage and/or cash flow problems could yet force farmers still carrying old crop stocks to sell the majority of the surplus prior to the arrival of new crop, they muse. That could put nearby levels under further pressure yet, until they get to such a discount to new crop that those with storage can no longer say no, and step in to take advantage of the large carry on offer.

The alternative scenario, the HGCA highlight, is one where shorts want/need to buy old crop to cover their requirements, bringing nearby levels up to closer to a more normal differential to new crop. The former case is probably a more likely guess as to have things might ultimately pan out than the latter at this stage though.

It's currently quite difficult to see support for old crop coming from genuine end-users as we enter what is traditionally a low demand for feed time of the year. Meanwhile, one trader I spoke to yesterday told me that full spec milling wheat premiums in his area were down from around GBP50/tonne in January to more like GBP30/tonne in April.

Spain said that it would harvest 10.7% more soft wheat this year at 6.19 MMT. Although plantings are virtually identical to a year previously, yields are seen rising from less than 3.0 MT/ha to over 3.3 MT/ha. Spanish barley production meanwhile will leap almost 24% to 8.34 MMT. Spain of course are traditionally one of the UK's big export homes.

Finally, the USDA's FAS in Poland estimated their wheat crop down 8.6% at 10.6 MMT this year, with exports in 2015/16 falling nearly 13% to 2.7 MMT.