EU Wheat Mostly Cautiously Higher Amidst Market Uncertainty
26/03/13 -– EU grains were mostly cautiously higher amidst market uncertainty surrounding the sketchy "details" of the Cyprus bailout, and what the implications might be for the rest of Europe - and indeed commodities. The trade also seems to be treading water ahead of Thursday's USDA stocks and planting intention numbers. If that isn't enough uncertainty for you then add in unusually cold and wet weather across Europe and the US. Is that good or bad for winter sown crops, and what are the implications for spring grains? The jury is out on all of the above.
London wheat closed with front month May 13 unchanged at GBP201.50/tonne and new crop Nov 13 GBP0.45/tonne firmer at GBP186.50/tonne. May 13 Paris wheat was EUR1.75/tonne higher at EUR245.00/tonne.
Yesterday's early forecasts on European yields from the EU Commission's MARS unit painted a picture of general well being, although it has to be said that their prediction of a 20% recovery in UK wheat yields back to "normal" levels of over 8 MT/ha this year was largely greeted with derision. The problem is, one look at that number immediately undermines the credibility of all the others, leaving us no further down the line towards some accurate production forecasts for 2013 than we were last week.
Agritel say that the very heavy weekend snow that Ukraine got will mean no more fieldwork for 2-3 weeks in much of the country, and that could set spring barley yields back 10-15%, they estimate.
Russian spring grain plantings meanwhile are less than 1% complete, so it is very early days there. There is however a sizable question mark hanging over winter wheat potential. A very dry autumn and early winter followed summer drought in Russia. "That means fields are very dry through a deep layer. It is very hard to turn around wheat under these circumstances," say Martell Crop Projections.
"It is the same story in the US Great Plains, with a super-dry fall almost always having a negative bearing on yields. There are rare exceptions to the rule, when ultra-heavy winter rainfall occurs. That happened only once in the Great Plains to turn wheat potential around, and it took 150-200% of normal winter rainfall to improve wheat potential," they add.
Anecdotal evidence suggests that crops in the North Caucasus and Southern Region of Russia can expect average production at best in 2013, and this at a time when domestic carryover stocks from 2012/13 will be at an absolute minimum. Russia sold 55,727 MT of intervention grain in it's now regular twice a week tender today, taking the total sold since sales began in October to 2.485 MMT.
Surprisingly then, a report on Reuters suggests that Russian wheat prices have now fallen low enough to make them competitive again on the international stage, and that a further 3-400,000 MT of exports might be possible in the Apr/Jun period.
Similar conditions to those in Russia appear to exist in Romania where this year's cereal production will be "good, if not great" according to the Ag Ministry there.
Another Reuters report paints a very bleak picture of the developing situation in Egypt, where bakers are threatening to go on strike if the government doesn't cough up 400 million Egyptian pounds in unpaid subsidies that they say is owed to them. The report suggests that Egypt could be absent from the international tender market until after the current financial year ends (at the end of June). After that they hope to secure a USD4.8 billion loan from the IMF, which may enable them to fund further wheat purchases on the international stage in the second half of the calendar year.
Meanwhile government forecasts for a record wheat crop of around 9.5 MMT this year are not realistic, traders say. Neither are the Egyptian government's plans to procure 4.5 MMT of their wheat requirements on the local market versus only 2.4-3.7 MMT normally, as Egyptian wheat quality simply isn't high enough, the report states.
In other news, China are said to have wasted no time in welcoming Australian rapeseed back into the fold after four years in the wilderness. Two state-owned companies have bought 4-5 cargoes of Australian rapeseed, according to media reports, having forced themselves to almost exclusively rely on Canada for their import needs in recent years. Oil World today raised their forecast for Australian rapeseed production this year to a record 3.7 MMT, with India's output also seen sharply higher, up 24% to 7.2 MMT. EU output is seen broadly unchanged at 19.24 MMT.