London Wheat Hits One-Month Highs On Sterling Weakness

29/09/16 -- EU grains closed mostly higher, but still largely trapped in a sideways move. Nov 16 London wheat staged it's best close in more than a month helped by sterling weakness.

At the close Nov 16 London wheat was up GBP0.80/tonne at GBP127.00/tonne, Dec 16 Paris wheat was EUR0.75/tonne higher to EUR161.75/tonne, Nov 16 Paris corn was EUR0.50/tonne firmer at EUR160.50/tonne, Nov 16 Paris rapeseed was EUR3.00/tonne better at EUR376.75/tonne.

Brussels approved 468 TMT worth of soft wheat export licences this past week, taking the season so far total to 6.35 MMT, a 23% increase on this time last year (although note that the rate of increase was 25% just last week).

Barley exports at 8 TMT were less impressive. The season to date total for those is only 1.19 MMT, some 65% less than this time last year.

The growing theme for the global wheat market is one of rising production (although not here in Europe), but not necessarily for quality milling wheat which many think could be in a shortage situation this year.

Underlying this theme, the IGC today raised their forecast for the 2016/17 global wheat crop by 4 MMT to 747 MMT. "The outlook for wheat is again cut for the EU, but this is outweighed by increases for Australia, Canada, China and Kazakhstan," they said. Carryover stocks were increased 2 MMT to 231 MMT.

The EU-28 soft wheat crop was placed at 143.6 MMT, down from 145.2 MMT previously and down 10% versus 159.8 MMT a year ago. EU-28 ending stocks were cut from 13.2 MMT to 11.6 MMT (15.5 MMT a year ago).

The head of the Russian Grain Union estimated grain production in bunker weight there this year at 124 MMT (or 115 MMT in clean weight). The clean weight total will include 72,5 MMT of wheat, he said. Grain export potential in 2016/17 was pegged at 30 MMT. Whether they achieve this potential is another matter however. Cumulative exports so far are 7% below year ago levels.

The Russian harvest officially stands at 100.4 MMT (89.4% done) in bunker weight, including 74.6 MMT of wheat (95.7% harvested), 18.7 MMT of barley (95.4%) and 3.2 MMT of corn (21.2%). Plantings for the 2017 harvest are said to be 64% complete on 11.1 million ha.

Ukragroconsult said that the pace of Ukraine autumn/winter planting is behind both last year and the 5-year average due to dryness in parts of the country. According to the government growers there will plant 7.37 million ha of winter grains (mostly wheat) and 724k ha of winter OSR.

They also peg Romania's corn crop at 8.1 MMT, down 850 TMT on their previous estimate due to long-term drought.