London and Paris wheat 'struggling to keep their heads above water'
The pound took a bit of a hit after it was revealed that UK inflation fell to 1.6% in July, down from 1.9% in June. That seemingly puts the Bank of England under little pressure to raise interest rates just yet. That may have helped buoy London wheat a little today.
The day ended with Nov 14 London wheat down GBP0.20/tonne at GBP121.10/tonne, Nov 14 Paris wheat was up EUR0.75/tonne at EUR172.50/tonne, Nov 14 Paris corn was up EUR0.75/tonne at EUR153.75/tonne and Nov 14 Paris rapeseed fell EUR2.00/tonne to EUR319.50/tonne.
London wheat in particular is still swimming against a potential tidal wave of new crop feed wheat coming its way in 2014/15.
As already discussed on here, Strategie Grains' latest estimates indicate that there will be around 20 MMT more feed wheat in Europe this year than there was last season.
Today, a Ukraine analyst with Agrotrade estimated that as much as 70% of their wheat crop might also be confined to the feed bin this year.
Persistent rain in the run-up to harvest-time, the same plight suffered by the French wheat crop, is the reason they gave. That compares with a Ag Ministry forecast of "only" 40% of this season's crop being feed grade versus 25% a year ago.
If the higher Agrotrade estimate is correct then Ukraine will have around 15.4 MMT of feed wheat on it's hands this year, up almost threefold from 5.6 MMT a year ago.
This isn't good news for feed wheat prices, not with a large (and near record) EU-28 corn crop also on the way. Ukraine too are expecting to harvest a corn crop that will only be beaten in size by last year's bumper production. If EU producers can afford (and have the room) to store their 2014 corn crop that's a luxury that will not be available to many of the producers in Ukraine. Their crop will most likely simply flood onto the market as soon as it's harvested.
EU growers don't much care for current wheat, barley or rapeseed prices - let alone those for new crop corn - but it's perhaps unlikely that many here will be able to simply store their entire inventory for both financial reasons as well as those regarding physical space. Storage also costs money too of course.
So here we are, caught between a rock and a hard place, with cash prices at, or very close to, 4-year lows on all four of those commodities.
The French wheat harvest should be just about over by now, so a more accurate assessment of the final quality there shouldn't be too far away. "Highly variable" is probably the best way to describe their crop this year.
Meanwhile the German wheat harvest is said to be around 75% complete. What's been cut so far is said to be "fairly decent" according to a report on Reuters today. It's the final 25% that is now causing concern, it too has been dogged by late season rains. Hagbergs so far are said to be "OK" and protein levels are maybe down half a percentage point on the recent average.
The German farmers' association DBV raised their forecast for the 2014 grain crop there to 50 MMT versus 47.7 MMT a year ago. That includes 26.2 MMT of wheat versus a previous forecast of 25 MMT and up 6.5% compared to 24.6 MMT a year ago. Rain it seems does indeed make grain. It's quality, not quantity, that the market is worried about.
Paris wheat for Nov 14 currently trades at the equivalent of around a EUR21.50/tonne premium to London wheat, up from EUR16/tonne a month ago. We could see that gap widen further yet.
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