US wheat yields expected to be down due to drought
The day ended with the thinly-traded and soon to expire Jul 14 London wheat contract down GBP2.00/tonne at GBP132.00/tonne and with the more liquid new crop Nov 14 London wheat closing GBP0.05/tonne higher at GBP134.30/tonne. Nov 14 Paris wheat closed unchanged at EUR184.25/tonne, Aug 14 Paris corn was up EUR1.50/tonne at EUR171.25/tonne and Aug 14 Paris rapeseed was EUR0.25/tonne firmer at EUR337.50/tonne.
This was a new lowest close for a front month in London wheat in 4 years for the third session in a row. The soon to be new front month, Nov 14, could only manage nominal gains having traded both sides during the day, as the spread between Nov 14 and Nov 15 widened to GBP8.95/tonne.
The weak euro continues to support Paris wheat a little. Conversely, the strong pound remains a millstone around the UK market's neck.
The FAO increased its forecast for global cereals ending stocks in 2014/15 to the highest since 2001. The world wheat crop was increased by 4 MMT from last month to 707 MMT, with the global corn crop upped by 13 MMT to 1001 MMT.
For wheat "overall yields in the US are expected to be down due to the drought in the Southern Plains. In Canada there is increased concern over continued frequent rains and cool temperatures particularly in the Prairies region, though conditions of seeded crops remain favourable. In the EU, Russia, Ukraine and China conditions are mostly favourable," they said.
Despite the production increase, world wheat ending stocks were actually reduced by 2 MMT to 180 MMT, although that's still 6 MMT more than at the end of 2013/14. Corn carryout at the end of 2014/15 was increased by a whopping 31 MMT from last month to 200 MMT, "driven by expectation of much higher carryovers in China and the US." That's now 27 MMT more than at the end of 2013/14.
They estimated the EU-28 wheat crop at 147.3 MMT, a 2.7% increase on last year, 1 MMT more than the USDA and a total only beaten once before - in 2008. The EU-28 corn crop was forecast to rise to 66 MMT.
They pegged the Russian grain crop at 87.9 MMT, which is similar to their estimate of last year. They said that Ukraine's crop will fall 9% to 57.1 MMT "as yields are projected to return to average, after record levels in 2013."
A report on Reuters said that German farmers are holding back on selling new crop wheat ahead of harvest due to the low prices on offer. Buyers bids are currently said to be around EUR4/tonne over Paris futures. With low interest rates, many are said to be talking about taking out loans to cover their financial needs and storing their new crop instead if they are able. That's scenario that's likely to be replicated elsewhere in Europe too, if sufficient storage and easy credit is available.
The first wheat cuttings in France are said to be displaying reasonable protein levels.
The final week of June saw 285 TMT of soft wheat export licences granted in Brussels, taking the now finished 2013/14 marketing year total to a record 28 MMT, up 48% on a year ago. Licences were also granted for 146 TMT of corn imports, taking the seasonal final total to 14.5 MMT, a 34% jump versus 2012/13.
As one season ends another begins, and the new one is already echoing the old. Soft wheat export licences for the partial first week of July totalled 21 TMT versus corn import licences of 132 TMT.
At home, Defra said that 505.7 TMT of wheat was milled in the UK in the 4 week period to May 24, a 1.2% rise on 12 months previously. The percentage of home grown wheat included in the grist was up from only 61.6% in the quality troubled year that was 2013 to a more normal 81% this year.
Overall though, for the 47 weeks to May 24, the percentage of home grown wheat used was only up marginally, from 73.9% in 2012/13 to 76.8% in 2013/14.
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