EU Wheat Mostly Higher On Increased Demand Ideas

Posted by Nogger - a legend in his own mind at 19:20 | Categorized as

11/04/13 -- EU grains bounced mostly a little higher, supported by firmer US corn and wheat futures which were up on ideas that the recent downwards spike in prices is stimulating some increased demand.

On the day, London wheat closed with front month May 13 up GBP0.55/tonne to GBP199.10/tonne and new crop Nov 13 up GBP0.75/tonne at GBP186.75/tonne, even though the pound rose to its best levels against a weak dollar since Feb 20. May 13 Paris wheat closed EUR0.25/tonne firmer at EUR245.50/tonne.

Yesterday's USDA report raised 2012/13 world wheat ending stocks by around 4 MMT, although 3 MMT of that came courtesy of increases to 2011/12 carryout. EU-27 wheat production last year was actually cut slightly by virtue of a reduction in the USDA's estimate for the UK wheat crop which was trimmed from 13.5 MMT to 13.26 MMT. EU wheat consumption was cut by 0.5 MMT this season to 121 MMT, whilst corn usage was raised 1.5 MMT to 67.5 MMT.

The USDA increased Europe's wheat export estimate for 2012/13 by 1 MMT to 20.5 MMT, which is 24% more than last season. Brussels today confirmed that they'd issued 362 TMT of all wheat export licences this week, although that was a 12 week low that still takes the season's total to date to 16.92 MMT, up 42% on year ago levels. Weekly exports now need to average 327 TMT/week to hit the USDA's new target.

MDA CropCast cut 1.8 MMT off their EU 2013 winter wheat production forecast to 128.7 MMT, which represents a modest 1.6% increase on last year. A USDA attaché estimated the EU 2013/14 all wheat crop at 139 MMT, up 5.3% on this season. He said that German winter wheat conditions are good, but noted problems in the UK and France due to wetness and cold.

MDA CropCast increased their Moroccan wheat production forecast by 0.9 MMT to 5.8 MMT, up nearly 57% on last year, and cut 0.7 MMT off Canadian potential to 28.3 MMT, although that's still an increase of 7.2% on last year. They have this year's EU barley crop unchanged from last week at 54.2 MMT, up 2.8% on last year. OSR output was also left unchanged on a week ago at 18.56 MMT, up 2.9% on last year.

European weather conditions are finally set to improve the forecasters tell us, with temperatures in the 18-20 C region promised for East Anglia on Sunday. On the continent things are looking brighter too. "Temperatures are beginning to warm again in western and southern areas, and readings should continue to moderate through next week. This will help to finally accelerate wheat growth across the continent. Also, showers are beginning to return to France and Germany, which will improve soil moisture there. Meanwhile, drier weather in Spain and Italy will allow wetness there to ease," say MDA CropCast.

Defra said that UK animal feed production in February was up 5.9% year-on-year, although wheat usage in feed was down 6.7% to 233 TMT. Barley usage jumped 45.5% to 67 TMT. In the four weeks to Feb 23rd 520 TMT of wheat was milled in the UK, 15% more than in Feb 2012. Of that, home grown usage was down 12% to 356 TMT, whilst imported usage was up 233% to 164 TMT.

The increasing reliance on imports looks set to last well into next season. Despite the fact that the pound has improved in recent weeks against both the dollar and the euro, sterling still isn't that far above 18 month lows against the euro (around 1.14), and a near 3-year low (circa 1.48) set against the dollar only a month ago. That continues to make the cost of imports pretty expensive going forward.

There's talk that Ukraine may lift it's export ban on wheat in the next 2 weeks. The USDA upped their forecast for Ukraine's 2012/13 wheat exports from 6.5 MMT to 7.0 MMT yesterday. They've currently shipped around 6.3 MMT. APK Inform estimated Ukraine’s 2013 grain crop at 53.4 MMT, up 15% from 2012. They have 2013/14 grain exports at 30.1 MMT, up 23% from 24.4 MMT this season.

Bangladesh are said to have paid the lowest price so far this financial year in a tender to buy 50 TMT of optional origin wheat for May shipment, possibly from India.

In the US "another hard freeze developed overnight on the High Plains increasing worries about potential crop damage. Temperatures fell to the teens-low 20s F for the second night in a row, increasing worries about potential damage in jointing wheat," said Martell Crop Projections. Most agronomists now seem to think that some yield damage has definitely been done in Oklahoma and Kansas over the past week, although the extent of tit won’t be known for another 7-10 days.