World Grain - November 2013 - 20

grainmarketreview

Wheat

World ending stocks

Market turns more bullish after
a period of bearish confidence
over supplies
by Chris Lyddon

(in million bushels)

8,000

4,000

7,000
6,000
5,000
3,000
1,000
0
2013*

2012

2011

2010

2009

2008

2007

2006

2005

2,000

2004

Wheat prices have come under pressure in recent months as the
market has become more aware of the approach of an increased crop
and what is likely to be a marketing year with a comfortable supply
situation. However, more recently concerns over supplies in some
areas have proved bullish for wheat while the U.S. government shutdown in the first half of October created confusion by triggering the
cancellation of several important USDA reports.
In the Food and Agriculture Organization's (FAO) Crop Prospects
and Food Situation Report for October, the United Nations body said
that "export prices of wheat in September remained relatively unchanged compared to the previous month."
"The benchmark U.S. wheat price (No.2 Hard Red Winter, f.o.b.)
averaged $312 per tonne, which is 16% lower than in September
2012," the FAO said. "Strong export demand, particularly from
China, and the weaker U.S. dollar more than offset the downward
pressure provided by favorable prospects for the 2013 world wheat
output, forecast at a record high," it said. "Export prices from the
Black Sea region and Europe were also stable in September."
The International Grains Council (IGC) in its Sept. 26 report,
said that the wheat sub-index of its IGC Grains and Oilseeds Index
(GOI) rose by 1% month on month, underpinned by quality issues
and export demand, but remained around the lowest levels seen
since June 2012.
"Increasing confidence that world wheat supplies would be adequate in 2013-14 weighed on market sentiment during the first part
of September," the IGC said. "Weakness also stemmed from declines
in row crops, especially corn, although this was tempered by solid
export demand.
"Markets turned more bullish towards the end of the month, boosted by concerns about lower export potential in Argentina and suggestions that China would need further imports," it said. "Prospects for
ample world wheat supplies and a record corn harvest continued to
weigh on futures in the U.S. There was additional pressure from concerns about slowing export demand. However, exporters were more
optimistic at the end of the month as sales continued to outpace the
level needed to meet the official export projection.
"Expectations that Brazil would need more non-Mercosur purchases following potentially crop damaging frosts in Argentina
and that China would likely import more because of a sustained
rise in local prices, helped to spark a late-month futures rally,"
the IGC said.
Analysts complained that the market was kept in the dark during a crucial time because of the U.S. shutdown, which meant that
regular USDA reports did not appear during the first half of October.
However, U.S. Wheat Associates reported that export trade carried

* Projected
Source: U.S. Department of Agriculture

on as normal. "USW is pleased to report no disruption in U.S. wheat
exports as a result of the U.S. federal government's partial shutdown
from Oct. 1 to 16," it said in its regular Wheat Letter publication.
"Federal grain inspectors, employed by USDA's Federal Grain Inspection Service (FGIS), sample, weigh, inspect and certify nearly
every wheat shipment exported from the United States," USW explained. "These inspectors remained on the job weighing and inspecting grain for export. While some FGIS employees were furloughed, user fees support inspectors and their work was not affected
by the lapse in Congressional appropriations."
It noted that USDA had announced it would not release the World
Agricultural Supply and Demand Estimates (WASDE) report originally scheduled for October 11, "nor will it make up two weekly crop
progress reports that it would have issued during the shutdown. Yet,
USW is glad that USDA colleagues are back to work and believe our
customers should be encouraged that the U.S. wheat store remained,
and will continue to be, open for business."
David Sheppard, managing director of U.K. traders Gleadell,
highlighted support for prices in Europe. "E.U. markets also remain
supported by the likelihood that the Black Sea region may disappear
from the wheat export market, either to concentrate on exporting
bumper corn crops or replenishing stocks, especially given the area's new-crop planting problems," he said in a report on the market.
"E.U. exports are running 3.5 million tonnes ahead of last season,
although the main export push has not been from France, but more
from German and Eastern E.U. states."
The U.K.'s HGCA reported on Oct. 18 that Paris wheat futures for
November 2013 delivery rose through the €200 per tonne mark, a
key psychological level not seen since June. Strong Chinese demand
has continued for both U.S. and Australian wheat, it said.
Chris Lyddon is World Grain's European editor.
He may be contacted at: chris.lyddon@ntlworld.com.
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November 2013 / World Grain / www.World-Grain.com

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World Grain - November 2013

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