EU Wheat Rebounds On Short Covering/Bargain Hunting

14/05/15 -- Wheat rebounded from recent losses to close with decent gains on short-covering/bargain hunting. Corn was also higher, but only to the tune of a euro or two, and rapeseed closed a little lower.

At the finish, May 15 London wheat was up GBP2.80/tonne at GBP108.45/tonne, Sep 15 Paris wheat ended EUR5.00/tonne higher at EUR176.00, Jun 15 Paris corn rose EUR1.00/tonne to EUR155.00/tonne whilst Aug 15 Paris rapeseed fell EUR1.25/tonne to close at EUR354.50/tonne.

US wheat markets were sharply higher as fund money got spooked into covering in some of their massive short position with Chicago wheat posting its largest one day gain in three years, according to Benson Quinn.

That was probably down to a combination of factors: the strengthening El Nino, excessive wetness suddenly pounding US winter wheat on the Plains just before the harvest begins, there was even talk today of a hot/dry pattern beginning to emerge in Russia.

The latter would be a particularly interesting development, should it transpire.

Spring planting in Russia is only 42.3% done so far on 13.1 million ha, which is 1.8 million ha less than this time last year. Spring wheat is only 22.3% planted.

Weather models that I am looking at do indeed forecast temperatures to be well above normal in the 8-15 day time frame. However, most of the country, apart from the Southern Region, is also forecast to get above average rainfall across the coming 15 days. Watch this space for developments on that story...

The Russian Ag Ministry are predictably keen to keep a bullish spin on things. They've reduced their estimate for the total winter grains are that suffered from winter kill from 1.8 million ha to 1.3 million, or 7.8% of the total planted area. That's about a "normal" percentage.

They maintained their forecast for grain production in 2015 at a nice round 100 MMT. Not everyone is quite so optimistic, the USDA were at 90.8 MMT this week, including 53.5 MMT of wheat.

MDA CropCast today trimmed their forecast for Russia's wheat crop this year by 1.1 MMT to 52.8 MMT. They also lopped 1.4 MMT off their estimate for wheat production in Ukraine, bringing their figure down to 21.6 MMT versus the USDA's 22.0 MMT prediction.

Incidentally, in addition they pared back their outlook on both the Russian and Ukraine barley crops too, reducing those by 1.8 MMT and 2.1 MMT respectively to 16.7 MMT and 6.5 MMT. The USDA are even lower at 16.5 MMT and 6.2 MMT, a drop of 18% and 34% on production last year.

In other news, Brussels announced that they'd issued 477 TMT worth of soft wheat export licences this past week, taking the season to date total to over 28.4 MMT with 7 weeks of the campaign remaining. Add on wheat flour and durum wheat exports too and the "all wheat" total is over 30 MMT. Barley exports are now past 8 MMT, and those for corn have almost reached 3 MMT.

Note that in all of the past 5 seasons total exports of soft wheat have exceeded the total volume of licences issued, according to the HGCA.

Strategie Grains today increased their forecast for total EU soft wheat exports in 2014/15 to 32.2 MMT. Things don't look quite so promising for 2015/16 however, they reduced their estimate for exports there by 2.6 MMT to 28.6 MMT. Carryout at the end of next season was raised by 1.6 MMT to 17.5 MMT, which is far higher than the 14 MMT predicted by the USDA on Tuesday.

The anticipated imminent end to the hefty export duty on Russian wheat could mean another 1.9 MMT of the grain being exported between now and the end of the season, according to Rusagrotrans. That would hike Russia's 2014/15 total wheat exports to around 22 MMT.