Jonathan Lane, Gleadell Grain’s Trading Manager, recounts the latest developments in the global grain markets, which this week have been largely dictated by the drought in South America.

Markets remained finely balanced, with US markets eyeing weather in South America, and EU markets looking at increased export potential. The USDA report last week set the tone, as rainfall set funds into sell mode following the bearish numbers. However, local reports still show production estimates well below current USDA projections regarding Argentine corn production.

In the EU, the weaker € and firming Black Sea prices have allowed French wheat to feature in recent Egyptian tenders, leading to a reduction in closing French stocks. UK exports also showed a marked increase in November as low water in the Rhine and Danube prevented river shipments from central Europe, forcing EU feed producers to turn to supplies shipped by sea.

Fundamentals of the market still point to abundant supplies of wheat and other feed-grains. Markets will continue to focus on South American weather and future USDA cuts in Argentine/Brazilian corn production estimates cannot be ruled out. The new crop grain outlook remains promising except for the Ukraine where, if grain is re-seeded in the spring – most probably with maize, this will be higher yielding than wheat, increasing the feed-grain stockpile. 

Summary

• The Canadian wheat board sees smaller 2012/13 global wheat crop at 677mln/t, and the outlook remains bearish.
• The AAFC sees Canadian 2012/13 all-wheat production at 26.5mln/t, with ending stocks projected at 7mln/t.
• Black Sea (Russia/Ukraine/Kazahk) July-December grain exports placed at 30.7mln/t, and could export another 28.5mln/t January-June 2012.
• Strategie Grains raised its estimate for EU 2011/12 grain output to 285mln/t, and projects 2012/13 grain output up 1.7% to 289.8mln/t.
• About a third of Ukraine’s winter grain crops remain in poor condition as of mid-January due to severe drought.
• Egypt’s GASC purchased 180k/mt for March 21-31 shipment, including another 120k/mt French wheat.
• Argentine grain exchange report corn plantings are slowing due to dry weather that has already damaged crop.
• The French farm ministry lowered wheat ending stocks to 2.3mln/t, based on higher Non-EU exports projection.
• UK wheat exports for November reach a season’s high of 442,797 tonnes, bringing the season-to-date total to 1.25mln/t.