EU Wheat Stages Late Recovery

22/09/15 -- After trading lower for most of the day, in "Turnaround Tuesday" style following yesterday's advances, EU wheat futures managed to finish in the green by the end of the session.

At the close, Nov 15 London wheat was up GBP0.40/tonne at GBP111.40/tonne. In Paris, Nov 15 wheat was EUR1.25/tonne higher at EUR171.50tonne, Nov 15 corn was down EUR0.75/tonne to EUR161.25/tonne and Nov 15 rapeseed was EUR0.75/tonne easier at EUR363.50/tonne.

Chicago wheat is down 20% since the end of June, and could be in for it's largest quarterly loss since 1986 by the end of the month, according to Bloomberg. Paris wheat is down by 16% in the same period, leaving losses in London wheat of "only" 6% since Jun 30 look relatively mild by comparison.

World wheat stocks, forecast at 226.5 MMT by the USDA at the end of 2015/16, will be the largest on record. They will also be more than 7% up on a year previously and represent the third year-on-year increase in a row.

That looks like continuing to weigh on the international wheat market for some time yet. Concerns over dryness in Russia and Ukraine, with winter wheat plantings there now well underway, are the best hope the bulls have to cling to at the moment. It is however going to be some considerable time before those worries can be quantified.

Ukraine's 2015/16 grain exports continue to be brisk. They've exported 5.93 MMT of grains so far this season, according to the Ministry of Economic Development and Trade. That's split 2.73 MMT of wheat, 1.87 MMT of barley and 1.31 MMT of corn, plus a few bits and pieces of other grains.

They say that carryover stocks of almost 11 MMT left over at the end of 2014/15 will swell total grains supply this season to nearly 70 MMT, with domestic demand estimated at little more than 27 MMT that leaves nearly 43 MMT left over to export or as carryover stocks at the end of the season.

Russia's exports have begun 2015/16 in slightly less impressive style, although both Rusagrotrans (4.7 MMT) and SovEcon (4.5 MMT) expect these to set a new record for the month of September.

Iran has announced that it has lifted the import duty applicable on wheat and barley, without saying why. The duty was only put in place in July following what is believed to have been a bumper 2015 harvest. The USDA currently predict Iran to import 2.5 MMT of wheat this season, half of the volume shipped in during 2014/15. Barley imports of 1.5 MMT were expected to be 25% lower versus last season.

Closer to home, Spain said it had imported more than 1 MMT of grains in July, up 5% from a year previously. Wheat imports of 360 TMT were similar to those of a year ago, but barley imports of 161 TMT were up 75%, whist corn imports fell 4% to 477 TMT.

The largest supplier of grains to Spain in July was France with 354 TMT, followed by Ukraine with 143 TMT.