EU Wheat Declines Pre-USDA

11/09/12 -- EU grains ended mostly lower with Nov 12 London wheat GBP2.00/tonne easier to close at GBP204.50/tonne and with Nov 12 Paris wheat EUR1.75/tonne weaker at EUR263.50/tonne.

The market was in consolidation mode ahead of tomorrow's USDA reports, nervous that there could be a surprise, particularly for soybeans.

The trade is split 75:25 in favour of a reduction in projected US soybean yields versus last month, but last night's upwards revision in soybean good/excellent ratings following Hurricane Isaac rains might suggest that a surprise increase is on the cards.

ABARES cut their Australian 2012/13 wheat crop estimate to 22.5 MMT from 24.1 MMT previously, which was bang in line with other trade estimates (except the USDA's 26.0 MMT). Despite that though, they increased wheat export potential by 0.5 MMT from last month to 21.5 MMT (and 0.5 MMT above the USDA's August estimate). That's a fall of only 6.5% from last season's record despite output falling by almost 24% thanks to very large carry in stocks from two years of bumper production.

Australia's barley production in 2012/13 was forecast to fall by 19% to around 7 MMT (the USDA currently say 8 MMT), whilst rapeseed output is expected to decline 2% to around 2.8 MMT (vs 3 MMT from the USDA).

Egypt bought 235,000 MT of Ukrainian, Russian and French wheat for Nov 11-20 shipment today. The prices involved, including freight, were 55,000 MT of Ukrainian wheat at USD352.20/tonne; 60,000 MT of Russian wheat from Glencore at USD355.38/tonne; 60,000 MT of French wheat from Granit at USD362.90/tonne.

French wheat is still clearly expensive, but at least Egypt knows it is going to get it.

This was their sixth purchase in a month, and suggests that they are looking to book up tonnage whilst Russian/Ukraine wheat is still available and holding down world market prices.

That might not be before long, as Egypt's enquiries nudge further forward Russian offers are drying up and prices are increasing rapidly. Today's Russian levels are up around USD15/tonne on the price paid for late October shipment only last Thursday.

Despite that, Russia's Deputy Prime Minister Arkady Dvorkovich reiterated once again that it has no plans to introduce grain export restrictions.

Oil World says that Germany's rapeseed plantings have increased by 13-15% this year, encouraged by high prices. French analysts Cetiom say that 2/3rds of French winter rapeseed is still to emerge due to the late cereal harvest and the hot/dry August.

UK harvest progress as of Sep 4 is placed at 55% of the wheat area, 40% of spring barley and 50% of the oat area, according to the HGCA.

Going forward, Reuters report that the EU is to impose limits on the use of crop-based biofuels over fears they are less climate-friendly than previously thought and that they compete with food production. Indications are that the industry will be left to stand on its own two feet after current mandates expire in 2020.