Jonathan Lane, Gleadell Grain Merchant’s trading manager, gives the latest update from the global grain market, where weather issues have compounded misery in the EU and caused deflation amongst previously confident US growers.

The euphoria of the USDA crop numbers last week, and the Crop Tour talking of potential ‘record yields’ and an early Kansas wheat harvest, appears to be short-lived as dry weather concerns in the US plains turned chart signals, which encouraged investors to cover short positions especially at the Kansas exchange. Crop ratings fell 3% over the past week, mainly due to the state of the Kansas crop. Spring wheat plantings should be complete by the end of this week well ahead of the average planting pace.

In the EU, grain markets are overshadowed by increasing financial woes. The ECB said that it has stopped providing liquidity to some Greek banks, further fuelling worries over Greece’s place in the euro zone, sending the euro lower and lifting the US$ to a four month high. While the euro debacle will continue to rumble on, fresh fundamental support became apparent with increasing concerns over the current weather conditions in the Black Sea region and the sharp reduction in the EU-27 wheat crop projection. At present the recent bearish tone appears to have been replaced by caution, although the USDA numbers would still point to adequate availabilities of both wheat and corn for the 2012/13 season.

Summary

• plantings 87% complete, 71% last week and 66% average. Spring wheat plantings 94% complete, 84% last week and 64% average.
• UK wheat exports slowed in March to 125,000mt, bringing the season-to-date figure to 2.11mln t.
• Kazakhstan cuts rail costs to boost exports - should allow the country to export an additional 2.5mln t.
• Ukraine’s grain stocks could reach record 12mln t due to the slow pace of exports – exports for July-May estimated at 18.5mln t.
• China’s 2012 corn output seen 3% higher at 197.5mln t, imports seen up at 6mln t – wheat output set to rise 2% to 120.3mln t.
• Indian May 1^st wheat stocks reported at 38.2mln t, almost 10 times official target for the quarter ending June 30^th.
• Russian grain analyst reports spring drought conditions in southern area have already inflicted ‘irreversible’ damage on some of the crop.
• USDA report winter wheat crop ratings down 3% on the week to 60% good/excellent – Kansas sees biggest reduction, down 8% on the week.
• Strategie Grains cuts EU 2012/13 soft wheat production by 4.2mln t to 122.7mln t, citing increased estimates of winterkill in Germany, France and Poland. This is significantly below all other trade house estimates and therefore must be treated with caution.
• Weather concerns mount in the main Southern grain area of Russia and the Ukraine as hot, dry conditions continue with some rain expected in some areas – but not all.