Russia upgrade, EU hopes send wheat prices lower

Wheat prices extended their decline as Russia forecast a rise in grains output next year, and European officials predicted a winterkill-free December for local crops, boosting hopes for the world harvest next year.

Wheat futures for March delivery touched a fresh contract low of $6.24 a bushel in Chicago on Monday, taking their decline so far this month above 6%.

Kansas City hard red winter wheat for March set a contract low of $6.70 a bushel, down more than 5% this month, with Minneapolis spring wheat shedding hitting a contract low of $6.59 a bushel, taking December losses nearly to 7%.

The decline reflected in part continued weakness in corn, a rival grain for uses such as livestock feed, which is being undermined by Chinese rejection of US corn cargoes over findings of contamination with a genetically modified variety as yet unapproved by Beijing officials.

However, wheat prices are also being undermined by waning concerns over a shortfall in world supplies, eased by a Canadian upgrade to a record 37.5m tonnes in its estimate for its 2013 harvest, and resilient hopes for the world's 2014 crop too.

Harvest upgrade

On Monday, Russia's agriculture minister, Nikolay Fyodorov, raised by 5m tonnes to 95m tonnes the target for the country's grains harvest next year, after improvement in autumn weather allowed farmers to catch up on sowings of winter crop hampered by persistent rains.

While Russian growers have seeded an estimated 14.7m hectares of winter grains - down 1.1m hectares year on year and only 90% of the area originally hoped for the figure is higher than feared as rainfall hampered sowings until late in the planting window.

At 95m tonnes, the 2014 harvest would exceed the crop of a little over 90m tonnes seen for this year, which has registered at 96.4m tonnes bunker weight, before drying and cleaning.

Next year's wheat crop will hit 55m tonnes, ahead of the 50m tonnes or so this year, Mr Fyodorov said.

'Winterkill unlikely'

Wheat harvest prospects for Russia, typically a major source of competitively priced grain, are much watched by grain markets, which received extra pressure from reduced winterkill concerns for the European Union harvest, the world's biggest.

Relatively warm weather is forecast for a "wide belt extending from the British Isles to the central part of Russia", the EU's Mars agriculture unit said.

And even if cooler weather does materialise, the process of wheat hardening, which prepares crops for winter freezes, is "well advanced" in many areas, including parts of the Czech Republic and Germany and northern Europe.

"Frost tolerance will increase significantly in the eastern regions of Poland and the Baltic countries for the last [10 days] of December.

"Frost kill events are unlikely to happen during this period," Mars said, adding that winterkill was unlikely before that too, and that, indeed, no winterkill damage had been detected in the EU so far this winter.

'Very high supply'

As an extra boost to world production hopes, seedings in India, a growing exporter, are being boosted by an increase in the government payment for wheat through its minimum support price programme.

"Total wheat acres are expected to exceed last year's acreage," broker CHS Hedging said.

Commerzbank said: "At present there is little doubt that the record-high supply in the current season will also be followed by another very high supply in the 2014-15 season."

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