London Wheat Closes At Near 5-Year Lows

11/05/15 -- EU grains closed mixed, mostly higher in Paris and lower in London after the pound rose to its best finish against the US dollar since before Christmas and was also higher versus the euro.

At the finish, May 15 London wheat was down GBP1.10/tonne at GBP106.85/tonne, Sep 15 Paris wheat ended up EUR0.25/tonne at EUR173.50, Jun 15 Paris corn rose EUR1.50/tonne to EUR156.25/tonne whilst Aug 15 Paris rapeseed jumped EUR4.75/tonne to close at EUR359.00/tonne.

London wheat has now taken out the September lows and closed at the lowest level on a front month in almost 5 years.

Large carryover stocks at the end of the 2014/15 season, and the prospect for increased wheat production in the US and Canada, along with a decent crop in Europe (and quite possibly a record large one in France) are creating a bearish vibe.

Prospects in Russia and Ukraine currently (and more importantly officially) don't look as bad as many feared back in the winter either, with production estimates down but not drastically so. For now at least, the market also seems fairly relaxed about the slow spring planting pace in both of these "pile it high and sell it cheap" countries. The imminent removal of the Russian export duty on wheat is another bearish factor.

ProZerno estimated Russia's 2014 wheat crop at 59.1 MMT, falling 7.8% to 54.4 MMT in 2015. They actually forecast an increase in the planted area of 3.5% to 25.9 million ha, but see yields dropping from 2.5 MT/ha to 2.24 MT/ha.

They see the sharp drop off in Russian exports since the duty was introduced though meaning that carryover stocks of a record 8.1 MMT will lift the total wheat supply in Russia to 62.5 MMT in 2015/16 - which is exactly the same volume available in 2014/15 whent wheat stocks a year ago to carry into this season were substantially less. Russia's wheat consumption needs in 2014/15 are pegged at 34.3 MMT, a similar requirement next season would leave 28.2 MMT of wheat left over for export and/or carryover stocks.

Russia's wheat exports so far this season stand at around the 20 MMT mark.

Russia's 2015 spring planting campaign hasn't got off to the best of starts though, with 9.6 million ha sown so far, down from 11.2 million this time last year. What has been seeded represents 31% of the government estimated area and includes only 1.6 million ha of wheat, or 12.1% of "plan".

Meanwhile, spring grain planting in Ukraine is 78% done on 5.5 million ha, according to their Ag Ministry. This time last year spring plantings were said to be completed on 6.7 million ha, so they're currently 18% behind last year's pace.

Switching back to Europe, Swiss-based barley traders Evergrain said that spring barley crop prospects in France were excellent helped by recent rains, and raised their yield forecast to 6.7 MT/ha versus the 3-year average of 6.5 MT/ha.

They also increased their yield estimates for Germany, England, Denmark and the Czech Republic to levels which are essentially broadly in line with the recent average.