EU Wheat Mostly Higher, Question Marks Over Russia, India, China
10/07/13 -- EU grains were mixed but mostly higher with benchmark Nov 13 London wheat closing GBP0.55/tonne firmer at GBP170.00/tonne and Nov 13 Paris wheat settling EUR0.75/tonne stronger at EUR197.50/tonne.
Today was maybe about a bit of consolidation and book-squaring ahead of tomorrow's all important USDA crop report.
We can only wait and see what that will bring. For wheat it may include the lowering of the Indian 2013/14 wheat crop. The USDA's FAS office today estimated wheat production there at 87.0 MMT as opposed to the USDA's current 92.0 MMT forecast, they also cut exports to 5.0 MMT, which is 3.0 MMT under where the USDA currently line up.
The trade will also be looking to see what they have to say with regards to Russian wheat production (and exports) in the light of recent downward revisions from private analysts. The grain harvest is now well underway in southern areas of Russia and pushing rapidly north. Whilst early yields of winter grains have been encouraging, currently up 26% on year ago levels, there is a feeling in the market that things will tail off as the harvest progresses into spring sown cropping areas.
It’s been very dry, and unusually hot, in much of Russia since spring sowing campaign was completed – and spring wheat typically accounts for around 40% of the Russian wheat crop. The main areas where early yields have been fairly strong are in the North Caucasus and Southern Districts. Further north in Rostov, where the harvest is now 50% complete, yields are only said to be slightly ahead of last year.
The President of Tatarstan, further north again, today said that the grain crop there would only total 2.5 MMT this year, 22% down on 2012, which was in turn 40% below output in 2011.
IKAR forecast the Russian wheat crop at 52.4 MMT, with exports at 15.4 MMT and domestic use of 35.0 MMT, they predict 2013/14 ending stocks of 7.5 MMT. APK Inform suggest 2012/13 wheat carryout was at a 10-year low of 2.8 MMT, which before you reach for the calculator, fails to add up to the tune of 5.5 MMT. Nobody is suggesting that Russia will import 5.5 MMT of wheat this season, they only imported 1.7 MMT of grain in 2012/13. So what gives?
Domestic usage is pretty inelastic, and IKAR's production estimate may also end up being too high, SovEcon after all only now suggest 49.5-51.5 MMT. A crop of 50-51 MMT, less domestic usage of 35 MMT and the replenishment of intervention stocks at the government's stated target of 5-6 MMT, only leaves room for exports of around 10-12 MMT including using up the carry-in, which is only about the same level as in 2012/13.
Another figure that will be looked out for tomorrow is Chinese wheat imports, which will surely be increased from the current 3.5 MMT forecast given their recent large purchases.
In other news, FranceAgriMer today estimated French wheat (incl. flour) exports at 17.95 MMT, an increase of 5.5% on 2011/12. They peg ending stocks at the close of the season just finished at 2.35 MMT, up 3% on a year previously. Barley exports were said to be 7.36 MMT (+27.2%), with carryout at 1.22 MMT (+27.6%) and corn exports at 6.78 MMT (-1.7%) and stocks at 2.82 MMT (+15.8%).
FCStone said that the Polish wheat harvest will begin next week, with output expected to exceed 9 MMT (the USDA currently say 9.2 MMT) compared with 8.6 MMT a year ago, and with yields of around 4.3 MT/ha. Old crop carryover stocks also appear to be larger than expected, they added.
Algeria has bought 150 TMT of optional origin, possibly French, wheat in a tender.
The harvest in Ukraine is in also full swing in many areas, indeed 90% of the winter barley crop is already in, with even the spring barley area 17% cut. Winter wheat harvesting is 46% done, producing 8.52 MMT so far. The OSR harvest is almost at the halfway point (48% complete) producing 906 TMT so far. Nationally 41% of the total grain area has been cut, with yields of 2.68 MT/ha up 37% on year ago levels.