London Wheat Sinks To 29-Month Low

27/05/14 -- EU grains closed mostly lower, with London wheat faring the worst, playing catch-up with some of the losses posted by the French market yesterday when the UK (and US) was closed.

The day ended with Jul 14 London wheat down GBP3.25/tonne at GBP147.00/tonne, a 29-month lowest close for a front month, and with new crop Nov 14 London wheat closing GBP2.10/tonne lower at GBP144.00/tonne. Nov 14 Paris wheat closed EUR0.25/tonne higher at EUR193.00/tonne, Jun 14 Paris corn was down EUR1.25/tonne to EUR173.25/tonne and Aug 14 Paris rapeseed fell EUR2.75/tonne to EUR353.25/tonne.

A generally improved weather outlook for Europe, the FSU and the US, plus the imminent arrival of the 2014 harvest (the combines are already rolling in Texas wheat areas, and barley will probably be getting cut in southern France and Ukraine within a matter of weeks) has taken us all the way back to where we started on new crop, prior to the Russian taking of Crimea and the spec buying that prompted.

Europe will probably bring in it's second largest wheat harvest in history, and it's biggest corn crop in at least 15 years in 2014, according to current estimates. Russia's grain harvest will be around last year's levels, maybe more if you believe their Ag Ministry's estimates, and Ukraine's crop won't be down by that much on last year by all accounts.

Crucially, Russia and Ukraine are expected to export similar volumes of grain to this year, whilst it's unlikely that European wheat will see as much demand as it did in 2013/14. On top of that, Europe will continue to import large quantities of corn, according to current forecasts.

The Ukraine Ag Ministry said that the country had exported a record 31.337 MMT of grains so far this season, including 16.673 MMT of corn and 8.981 MMT of wheat. There's a further 743 TMT already on vessels waiting to sail, or portside waiting to load, they added.

They also said that Ukraine farmers had already planted 7.6 million of an anticipated 2014 spring grain area of 8.1 million hectares. That includes 4.7 million ha of an expected corn area of 4.9 million ha. Plantings last year were 4.825 million ha.

Russia's IKAR said that large to medium sized farmers there had planted 9.3 million ha (71%) of the planned 13 million ha of spring wheat area, up from the 6.6 million ha sown this time a year ago. They've also planted 2.4 million ha of corn (93% of the planned 2.6 million), up from 2.2 million ha this time last year.

Russia's crops are currently reported to be in pretty good shape, with the forecast rains due across the next couple of weeks likely to be of benefit. Crops in Ukraine are looking good too, with the odd exception in the east.

Indonesia bought 125 TMT of new crop Russian 12% milling wheat in a tender, reportedly paying $290-295/tonne for it, including freight. That equates to around GBP172.50-175.50/tonne delivered.

Black Sea 12.5% milling wheat is quoted in the market at around $258-262/tonne FOB for Jul/Aug availability - the equivalent of around £153.50-156.00/tonne loaded at the port. New crop corn is said to be around $218-220/tonne FOB, which is only around the GBP130/tonne mark loaded at the port.

The German Stats Office said that they'd exported 12 MMT of grains in the first three quarters of the 2013/14 campaign (Jul/Mar), up from 10.2 MMT a year previously. Exports within the EU were down to 5.5 MMT from 6.5 MMT in that period, whist those to non-EU destinations were up to 6.4 MMT from 3.7 MMT a year ago, aided by good demand from Iran after EU sanctions against the latter were relaxed.

Toepfer raised their forecast for the German wheat crop in 2014 to 24.87 MMT, which is now almost 1 MMT higher than the USDA's forecast from earlier in the month, and also increased their outlook on rapeseed output to 5.72 MMT (USDA: 5.48 MMT).

Better weather in the US this past week means that growers there should have made big strides with their plantings of corn, soybeans and spring wheat when the USDA release their latest planting progress report this evening.

South Australian grain growers meanwhile say widespread rains there have fallen just in time, after crops were sown into dry soil.