Old Crop London Wheat Dragged Into The Mire

Posted by Nogger - a legend in his own mind at 18:42 | Categorized as

25/02/16 -- EU grains closed mixed, although old crop London wheat set new lows once more as it gets dragged every close to trading in double figures.

At the close of trading, Mar 16 London wheat was down GBP0.80/tonne at GBP101.90/tonne. In Paris, Mar 16 wheat was unchanged at EUR145.75/tonne, Mar 16 corn was up EUR0.50/tonne at EUR145.75/tonne and May 16 rapeseed wad down EUR3.00/tonne to EUR348.50/tonne.

Egypt's GASC was back in the market for wheat, paying between $175/tonne for French and $179.65/tonne for Romanian wheat. That's far cheaper than the $183/tonne paid for French origin and between $187.90/tonne and $188.65/tonne paid for Russian material just a week ago.

Saudi Arabia posted a tender for 770,000 MT of hard wheat and Tunisia were said to have purchased 75,000 MT of durum wheat.

Other wheat tenders are still kicking around form Algeria, Thailand and the Philippines, but even so there's still a feeling that the world is drowning in wheat.

Defra raised their figure for the UK's 2015 wheat crop by almost 300,000 MT to over 16.4 MT - the largest harvest since 2008. They also cut domestic consumption by over 100,000 MT to 14.7 MMT, raising the exportable surplus 38% to nearly 4 MMT. With only 1 MMT exported in the first half of the season, that sets the stage for carryover stocks of at least 2.4 MMT going into 2015/16 unless demand picks up.

Barley production was also revised higher giving us the largest barley harvest since 1997. "The barley surplus available for either export or free stock was also revised up in yesterday’s forecasts, taking it to 28% higher than 2014/15. Taking into account season to date exports of 760 TMT, this leaves 1.95 MMT available for export during January-June or to be carried over into next season," noted the HGCA.

It's handy then that sterling is so weak, although there's not been much sign of the UK being knocked over with foreign interest thus far.

The old crop/new crop London wheat spread continues to widen, and tonight stands at GBP12.95/tonne on the May16/Nov16 position, up from GBP7.65/tonne on the last trading day of 2015.

Whilst that may be offering UK growers something of a comfort blanket, the fact remains that new crop has still fallen GBP9.20/tonne during this time, so it's really only a money-making strategy if you are short of old crop - something which I suspect that 99% of UK growers aren't.

So, where do we go from here? US wheat growers are already voting with their John Deere's and are expected to plant the smallest area to wheat since 1970, according to preliminary data out today. Their decision will of course have been influenced by expectations for the US dollar to continue to firm in 2016.

EU plantings are seen "about unchanged" though - up to 80 year highs in fact in France in fact where carryover stocks to kick off 2016/17 are also unusually high.

Production is anticipated 30% lower in Ukraine, but even so they are inevitably cheap sellers during the first quarter or two of the season at least, which takes us all the way into 2017 before we can expect some respite from cheap Black Sea competition.