EU Wheat Gives Up Some Gains As Egypt Cancel Import Tender

10/10/13 -- EU grains are trading higher heading into the close with Nov 13 London wheat GBP1.00/tonne firmer at EUR162.50/tonne and Jan 14 up GBP1.75/tonne at GBP163.50/tonne. Nov 13 Paris milling wheat is currently EUR0.75/tonne steadier at EUR198.25/tonne whilst Nov 13 Paris rapeseed is EUR5.00/tonne higher at EUR37.75tonne and Paris corn trades EUR0.50/tonne firmer at EUR174.00/tonne.

I'm off to the Hull Dinner this evening so this report is being posted ahead of normal time. Paris wheat traded above EUR200/tonne on the Nov 13, a close there would have been the first time since Jun 21st that a front month had closed above that level. Nov 13 London wheat hit GBP164/tonne - it hasn't closed that high since the last day of July, but both had failed to hold and slipped away heading into the close.

The reason for the capitulation may have been disappointment that Egypt, back in the market tendering for wheat for Nov 21-30 delivery, subsequently cancelled the tender. No explanation why was immediately available, but it could be that they judged the prices to be too high.

As was widely expected the Bank of England left UK interest rates on hold at 0.5% today - they've now kept them at the same level since March 2009. There was no change either to QE, which was kept at GBP375 billion. The pound didn't move much on the news, which was widely expected. The US dollar is firmer on optimism that progress is being made in resolving the US debt ceiling issue, even if only temporarily.

The HGCA reported that the Scottish wheat area for the 2013 harvest was the smallest since 2000 at 86,840 ha, a 14% decline on last year. The OSR area fell 8% year -n-year to 33,653 ha, with the barley area up 2% to 339,138 ha and the oats area increasing by 34% to 31,728 ha.

EU wheat is looking to extending its recovery from the mid-August harvest closing lows of GBP150.75/tonne in London and EUR182.00/tonne in Paris. The corn market in Paris also bottomed around then at EUR164.50/tonne, although for earlier harvested Paris rapeseed the front month low of EUR342.00/tonne came a little sooner - in late July.

Algeria bought 500 TMT of most probably French wheat at around USD290-291/tonne C&F for December shipment yesterday.

FranceAgriMer said that French wheat exports to non-EU destinations were up by 44% to 2.5 MMT in Q1 of the 2013/14 marketing year, with barley exports rising by 58% in the same period. They've increased their forecast for French wheat exports outside the EU now to 11.2 MMT, from 11 MMT previously and up 13% versus 9.9 MMT in 2012/13.

Strategie Grains today revised their forecasts for 2013/14 EU-28 crop production, trimming slightly their soft wheat forecast from 135.5 MMT to 135.2 MMT, although that's still an 8% increase on last year. In contrast, they upped their barley production estimate from 59.1 MMT to 59.3 MMT, also an 8% rise on 2012.

Corn output was also increased from 64.0 MMT to 64.9 MMT, that's a 13% jump on last year. They said that the relatively high price of French corn compared to Black Sea options would mean a rise in EU corn imports this season, which were increased from the 9.3 MMT forecast last month to 9.6 MMT, despite the fairly steep rise in production here.

It's worth noting that some of these numbers are significantly different to those issued by the USDA last month, the latter only had EU-28 corn imports at 7.5 MMT in the September WASDE report for example, highlighting that some large changes could be possible to the global supply and demand picture when the USDA finally resume issuing their reports.

Informa increased their forecast for the global OSR crop from 66.8 MMT last month to a record 68.7 MMT, and a 7.5% increase on last year. That figure is also significantly different to the USDA's 66.5 MMT estimate in September.

In their first peek into 2014/15, Strategie Grains said that they expect a small reduction in the overall cropped area in the EU-28. There will be a 5% drop in corn sowings in favour of a 3% rise in soft wheat plantings, they predicted. There will also be a 7% drop in the EU-28 spring barley area. This would appear to be partly a function of the current price differential between wheat and barley/corn and also the much better winter planting conditions this year.

This situation would appear to be likely to be replicated here in the UK, with talk already of bumper wheat plantings for 2014, and the potential for a strong jump in production to bumper, if not even record levels. There's nine month's to go yet until that particular baby is born though.