EU Grains Mixed, Does Forex Market Hold Key To 2016?

30/11/15 -- EU grains closed mixed, but mostly a touch higher on the day, with rapeseed regaining the "yellow jersey" position and closing with the largest advances on continued production concerns for 2016.

The day ended with Jan 16 London wheat up GBP0.15/tonne at GBP113.40/tonne. In Paris, Dec 15 wheat rose EUR0.50/tonne to EUR176.75/tonne, Jan 16 corn was unchanged at EUR165.50/tonne and Feb 16 rapeseed gained EUR3.50/tonne to EUR384.00/tonne.

For the month of November, London and Paris wheat and corn all down for the month, with only Paris rapeseed closing higher.

The pound fell below 1.50 against the US dollar at one point today, a close there would have been the first beneath that level in more than 7-months, before recovering a little late on.

Nevertheless, sterling remains "wobbly" against the US currency in particular, although the jungle drums are now starting to beat that pound strength may have run its course against even the euro as well, and that a downturn there is now on the cards for 2016.

Rabobank said that forex rates will have a bigger influence on agri-commodity prices in 2016 than ever before. If they are correct, and forecasts from some of the major bank/analysts hold true, then that might provide a bit of support for London wheat going forward.

ABN Amro said that sterling would be the weakest of all the major currencies in 2016. They say that the UK government will likely hold a referendum on a "Brexit" in Q3 of 2016, and a Bank of England interest rate rise is unlikely prior to that. The market had been factoring in a rise early in 2016.

Their favourite month for the first UK rate rise in years is now not until November next year. As such they see the GBP/USD exchange rate falling to 1.28 by mid-2016 and 1.25 in Q3 before recovering a little to 1.27 in Q4. That's way below where most other analysts line up. A recent Reuters survey put the GBP/USD rate at an average 1.5234 in mid-2016.

ABN Amro are also bearish on the GBP/EUR, seeing that at 1.41 in Q1, before falling to 1.35 in Q2 of next year and 1.3150 in Q3.

That could see London wheat benefit against not just the market in Chicago, but also compared with Paris wheat once we get towards the middle of next year.

As far as the EUR/USD exchange rate goes though, the US dollar is seen out-performing the single currency, hitting parity in Q1 of next year, before falling to 0.95 in Q2 and beyond, by ABN Amro. That largely concurs with Barclay's view of parity in Q1 and 0.98 in Q2 of 2016. This trend would see Paris wheat fare better than the Chicago market in the first half of 2016, and most probably beyond that.

Debate continues as to the size of UK wheat and rapeseed plantings for the 2016 harvest. Origin Enterprises estimate the UK wheat area at 1.9 million ha, up 2.5% on a year ago, and a bit higher than the HGCA's suggested 1.825 million. In contrast they see OSR plantings down 12% at 572k ha versus 565k from the HGCA. United Oilseeds were even more bearish at 536k ha, a 15% decline year-on-year, last week.

Winter crops in the UK are generally well established and in excellent condition though, Origin said.

In Ukraine, bits and bobs of winter plantings are still going on apparently. The Ag Ministry there say that 6.67 million ha of the originally intended area has now been sown (90% of the government forecast). That includes 5.64 million ha of wheat (91%) and 879k ha of barley (84%). Growers there have still only planted 649k ha (79%) of their originally intended winter OSR area.

Crop conditions and emergence in Ukraine are also well below year ago levels. Some are already talking of a wheat crop of only 17-19 MMT versus 27 MMT in 2015.

The fall out from the Turkish shooting down of the Russian fighter jet last week continues. Russia supplied 70% of Turkey's grain import needs last season, and 90% of them in Q1 of 2015/16. Sellers in Russia and buyers in Turkey are both said to be shying away from entering into new deals with each other for fear of restrictions being introduced that will only make the contracts more difficult to execute.

There are reports today of vessels carrying the Russian flag facing delays entering the Bosphorus Strait. Rusagrotrans said that Russia may have to re-direct around 1.6 MMT of grains intended for Turkey to other locations. The Turkish buyers of these commodities may also be forced to look elsewhere for suppliers.

Chicago Grains Closing Comments - Friday

27/11/15 -- Soycomplex: Beans closed a touch lower on the day, but higher for the week. Meal was a loser on both the day and for the week, and is currently the weakest leg of the complex. The USDA reported weekly export sales of 1,173,600 MT for 2015/16, down 35 percent from the previous week and 18 percent below the prior 4-week average. China (751,700 MT) was unsurprisingly the largest home, although the Netherlands (141,500 MT), Japan (76,200 MT), Turkey (67,800 MT), Taiwan (63,100 MT) and Spain (61,100 MT) were also featured buyers. Exports of 1,912,600 MT were down 16 percent from the previous week and 20 percent below the prior 4-week average, but still pretty decent. The primary destinations were China (1,297,400 MT), the Netherlands (141,500 MT), Taiwan (73,600 MT), Spain (61,100 MT) and South Korea (57,900 MT). Dryness in parts of Brazil is still a problem. In the northeastern part of Mato Grosso state, IMEA say that soybean planting is only 66% complete. "Even in central Mato Grosso planting has been delayed as much as thirty days compared to normal and farmers are concerned that the soybean yield potential may have already been compromised," says Dr Cordonnier. Meanwhile wetness in the south of the country has also spilled over into neighbouring Argentina. Here the current soybean seeding pace is the second slowest since 2005 due to the persistent cool/wet planting period, with the greatest delays in the state of Cordoba. Ukraine said that their 2015 soybean harvest is over at 3.76 MMT. Ukraine winter rapeseed emergence is only placed at 86%, of which 32% is rated weak/thinned. Jan 16 Soybeans settled at $8.73, down 2 1/4 cents; Mar 16 Soybeans settled at $8.75 1/2, down 2 1/4 cents; Dec 15 Soybean Meal settled at $282.40, down $2.40; Dec 15 Soybean Oil settled at 28.75, down 14 points. For the week, Jan 16 beans were 15 1/2 cents higher, Dec 15 meal was 60 cents lower and Dec 15 oil gained 85 points.

Corn: The corn market closed around 5-7 cents lower on the day, and with losses of 2 1/2 to 4 cents on the week. Trade was thin as it frequently is on the day after Thanksgiving, with many traders taking the opportunity to have an extended break. Weekly export sales of 2,036,300 MT for 2015/16 were a marketing-year high, and up noticeably from the previous week and from the prior 4-week average. Increases were reported for Mexico (1,112,100 MT), unknown destinations (269,100 MT), Japan (196,700 MT), Colombia (88,600 MT), Peru (79,300 MT) and South Korea (73,200 MT). There were also impressive sales of 528,500 MT for 2016/17 for Mexico (487,700 MT) and Japan (58,900 MT), with a few downwards revisions for Panama (-13,500 MT) and Nicaragua (-4,600 MT). Exports of 531,700 MT were up 37 percent from the previous week and 34 percent above the prior 4-week average. The primary destinations were Mexico (281,400 MT) and Colombia (116,700 MT). Ukraine said that their 2015 corn harvest was 95% done on 3.9 million ha for a crop of 21.82 MMT to date. The USDA have final production there at 23 MMT. France said that their corn harvest was 99% complete versus 97% a year ago. The EU Commission estimated the EU-28 corn crop down 26.2%, or -20.4 MMT, at 57.5 MMT. They see EU-28 corn exports in 2015/16 at 2.5 MMT versus 4.0 MMT last season. Reuters reported that China is to cut government support prices for corn by a further 10%. This will likely result in reduced Chinese sorghum, DDGs and barley imports, traders say. The FAO estimated China's 2015 corn crop at 221 MMT, down 4 MMT from previously and also 4 MMT below the current USDA estimate. Dec 15 Corn settled at $3.59 1/4, down 6 3/4 cents; Mar 16 Corn settled at $3.67 1/4, down 5 1/2 cents. For the week, Dec 15 corn was 4 cents lower and Mar 16 lost 2 1/2 cents.

Wheat: The wheat market closed lower on the day, but mixed for the week. Chicago wheat is the weakest leg and Minneapolis the strongest. The USDA reported weekly export sales for wheat of 303,700 MT for delivery in marketing year 2015/16, down 58 percent from the previous week and 23 percent below the prior 4-week average. There were also sales of 22,000 MT for 2016/17. On old crop unknown destinations (109,600 MT), Mexico (63,600 MT), Japan (50,300 MT), South Korea (38,600 MT) and the United Arab Emirates (25,000 MT) were featured buyers. The market continues to get information like this highlighting what everybody already knows - US wheat is simply too dear to feature into all but traditional (and usually nearby) homes. The EU Commission estimated this year's EU-28 soft wheat crop at 149.1 MMT, down slightly from 149.2 MMT a month ago, but up a tad on 148.7 MMT a year ago and a record crop. They see EU-28 soft wheat exports in 2015/16 at 27.9 MMT, a 16.2% drop compared to 33.3 MMT in 2014/15. EU-28 2015/16 soft wheat ending stocks will leap 6.6 MMT to 17.5 MMT, they predict. Russia's Ag Ministry dropped their forecast for the 2015 grain crop there by 0.5 MMT to 101.5 MMT in clean weight. That's down 3.6% on a year ago, although that was a post-Soviet era record. Their 2015 harvest is said to be now 99% complete at 108.3 MMT in bunker weight. That includes 64.0 MMT of wheat and 18.3 MMT of barley. France said that it's winter wheat crop for the 2016 harvest was 99% sown, 94% emerged and 44% at the early tillering stage. They estimate that 98% of the crop is currently in good to very good condition versus 93% this time a year ago. Dec 15 CBOT Wheat settled at $4.65 3/4, down 13 1/2 cents; Dec 15 KCBT Wheat settled at $4.50, down 7 1/4 cents; Dec 15 MGEX Wheat settled at $5.10, down 4 1/2 cents. For the week, that means that nearby Chicago wheat fell 22 3/4 cents, with the market in Kansas 7 cents lower and Minneapolis up 1 1/4 cents.

EU Grains Lower Across The Board Friday, Only Paris Rapeseed Manages Weekly Gains

27/11/15 -- EU grains closed lower across the board on the day, but mixed for the week. Rapeseed was the sole gainer compared with last Friday, despite falling 5 euros today, as the result of strong advances seen earlier in the week.

The session ended with with Jan 16 London wheat down GBP0.75/tonne at GBP113.25/tonne, Dec 15 Paris wheat down EUR0.75/tonne to EUR176.25/tonne, Jan 16 corn EUR1.00/tonne lower at EUR165.50/tonne and Feb 16 rapeseed EUR5.00/tonne weaker to EUR380.50/tonne.

For the week, Jan 16 London wheat was GBP0.95/tonne lower, Dec 15 Paris wheat was unchanged, Jan 16 Paris corn was EUR1.50/tonne lower and Fen 16 Paris rapeseed gained EUR3.50/tonne.

There hasn't been a great deal of fresh news this week. The market continues to debate the state of winter grains in Russia and Ukraine, and the implications for crop production there in 2016.

The outlook for lower EU and Ukraine rapeseed production next year, once more, is also in traders' minds, along with how the spat between Russia and Turkey will pan out amidst talk of a trade embargo. Russia's president Putin has described the downing of the Russian jet as a "stab in the back", and warned of "serious consequences" to come for Turkey. They currently import around 5 MMT of grains per annum from Russia.

A hangover from record world wheat, corn and soybean output this year, and the potential for bumper crops again in 2016, weighs though. World stocks are also at very high, and in some cases at record levels too.

The EU Commission today estimated the total grain crop here this year at 308.5 MMT, down 6.3% on last year. This year's soft wheat crop is now seen at 149.1 MMT, up a tad on 148.7 MMT a year ago. Barley production is also a bit higher at 60.8 MMT versus 60.2 MMT in 2014. The EU-28 corn crop is sharply lower however, down 26.2%, or more than 20 MMT, to 57.5 MMT.

They see EU-28 cereal consumption at 283.9 MMT versus 281.7 MMT in 2014/15, and exports at 42.1 MMT against 51.7 MMT last season. Soft wheat exports will total 27.9 MMT, a 16.2% drop compared to 33.3 MMT in 2014/15. Barley exports will tumble 21.3% to 10.0 MMT and those for corn will drop 37.5% to 2.5 MMT, they estimate.

EU-28 2015/16 cereal ending stocks are seen at 45.3 MMT versus 46.1 MMT at the end of last season, of which soft wheat stocks will leap 6.6 MMT to 17.5 MMT, they predict.

FranceAgriMer said that the French winter wheat crop was 99% sown, 94% emerged and 44% at the early tillering stage (all around the same levels as a year ago) as of Monday. The French winter barley crop was 100% planted, 99% emerged and 66% tillering, again very similar to the situation 12 months ago, they added.

The French corn crop is all just about in at 99% done. Winter wheat crop ratings are 98% good to very good, 5 points up on this time last year. French winter barley is 97% good to very good versus 93% a year ago.

Bloomberg reported that United Oilseeds estimate the UK rapeseed area at 536k ha, down 15% on a year ago and 29k ha less than the HGCA's early bird survey recently suggested. They see production in 2016 at 2.0 MMT, a 17% decline compared with this year and the smallest crop since 2009.

The Ukraine Ag Ministry reported that winter grains had so far emerged on only 5.3 million ha, or 80% of the planted area. Of the area that had germinated, only 64% is rated as being in good to satisfactory condition. That leaves 1.3 million ha of cropland so far yet to emerge, and an additional 1.9 million ha of winter grains in weak/thinned condition.

This doesn't include winter rapeseed. For that the Ministry say that 557k ha (86%) of what got planted has emerged, of which 32% is weak/thinned, meaning that 46% of winter OSR sowings are rated poorly or still haven't germinated at all yet.

Chicago Grains Closed For Thanksgiving And Early News

26/11/15 -- US markets were closed yesterday for Thanksgiving - the day that Americans have off to give thanks for us inventing them. Trade resumes this afternoon in a holiday-shortened session. Many will still be away, so trade could be thin and a bit choppy.

Note that soybeans have already hit 50% of their target to regularly trade higher in both sessions immediately before and after Thanksgiving.

The UK economy grew 0.5% between July and September it has been announced today. That was in line with expectations and the 11th quarterly rise in a row, even if it was down from growth of 0.7% in Q2. The market doesn't seem to impressed by the news as the pound is down against both the dollar and the euro this morning.

The Buenos Aires Grain Exchange said that the Argentine wheat harvest is about 20% complete at 1.5 MMT, leaving their forecast for this year's crop unchanged at 9.5 MMT. Early yields are coming in better than expected, they said. Soybean planting is 43.2% done and corn sowings are 39.1% complete, they added.

Trade talk suggests that Russian grain exporters have suspended entering into any fresh contracts with Turkish buyers for fear of the former introducing some form of restriction on sales/economic reprisals following the shooting down of a Russian jet over Syria earlier in the week.

According to Rusagrotrans Turkey was the second largest buyer of Russian grain in Q1 of 2015/15 - beaten only by Egypt.

EU Grains Mostly Lower In Uneventful Trade

26/11/15 -- EU grains closed mostly lower in uneventful trade with US markets closed for Thanksgiving. Rapeseed pressed on to new highs for the move, closing at the best levels on a front month since Aug 10th.

At the close, new front month Jan 16 London wheat was down GBP0.45/tonne at GBP114.005/tonne, Dec 15 Paris wheat was down EUR0.75/tonne at EUR177.00nne, Jan 16 Paris corn was EUR0.50/tonne lower at EUR16650/tonne, whilst Feb 16 Paris rapeseed jumped EUR3.50/tonne to EUR85.50/tonne.

Rapeseed is getting support from rising palm oil prices on the back of El Nino-perceived crop losses in Indonesia/Malaysia and also reduced EU and Ukraine plantings again this year.

Nervousness over what action Russia might take with regards to the Turkish downing of one of their jets earlier in the week might also be prompting a bit of short-covering in grains in general.

Turkey was reportedly a destination for 3.5 MMT, or around 12%, of all Russian grain exports so far this year. Around 1.4 MMT of that was imported in Q1 of 2015/16, almost 14% of all Russia's foreign sales.

Brussels confirmed that they'd released 523 TMT worth of soft wheat export licences this past week, down from a season to date high of 636 TMT a week ago. That takes cumulative 2015/16 exports to 8.7 MMT, down 27.5% on this time last year. France picked up 139 TMT, or 26.5%, of the weekly total. Their season to date share is now 2.8 MMT, or 23.3%.

Barley export licences this week were only 97 TMT, down from 126 TMT a week ago. Even so season to date barley exports total 4.6 MMT. Corn import licences were slightly higher than those granted for wheat imports at 527 TMT, taking the campaign total so far to 4.4 MMT.

Euro weakness continues, which should help EU exports as we enter 2016.

Algeria were said to have bought 75,000 MT of optional origin feed barley in a tender.

Russia's 2015 corn harvest is said to be 89.1% complete at 12.5 MMT off 2.4 million ha. Average yields are reported to be up 13.7% at 5.15 MT/ha.

Russian winter grain plantings for the 2016 harvest remain stalled at 16.3 million ha, or 95.3% of the government target.

US Ethanol Production Hits All-Time High

25/11/15 -- Soycomplex: Beans closed higher, in line with their "normal" trend to finish in the green heading into the Thankgsiving Day holiday. The UDSA reported 190,000 MT of US soybeans sold to unknown destinations for 2015/16 shipment under the daily reporting system. MDA CropCast were unchanged on their forecast for the 2015 US soybean crop at 3.9 billion bushels. There was no alteration either for Brazil (99.9 MMT) or Argentina (59.58 MMT). Soyoil continues to be supported on Indonesian palm oil production concerns related to El Nino, and calls for palm oil prices to continue to rise into the first half of 2016. Brazilian weather is mixed - a bit dry in some northern and central areas and too wet in parts of the south. Argentine weather is generally friendly. The trade is bracing itself for a deluge of old crop Argentine soybeans coming onto the market once new president Macri gets into office mid-December. Jan 16 Soybeans settled at $8.75 1/4, up 11 1/2 cents; Mar 16 Soybeans settled at $8.77 3/4, up 11 1/2 cents; Dec 15 Soybean Meal settled at $284.80, up $1.00; Dec 15 Soybean Oil settled at 28.89, up 58 points.

Corn: The corn market closed around 2-4 cents higher. Weekly ethanol production data from the US Energy Dept was supportive. Production last week hit a record 1.008 million barrels/day, an increase of 33,000 barrels/day from the previous week. The previous all-time high was 994,000 barrels/day. The EPA are expected to release their updated Renewable Fuels Standard on Friday. Spanish-owned biofuel operator Abengoa (who operate 6 ethanol plants in the US) are said to have applied for preliminary protection from creditors following a breakdown in negotiations with a new investment firm. John Deere report equipment net sales for the US and Canada are down 23% for the quarter and 18% for the year, according to FCStone. Poor machinery sales are a classic sign of farmer dissatisfaction with grain prices. MDA CropCast were unchanged from last week on their forecast for the 2015 US corn crop at 13.782 billion bushels. There was also no adjustment for Brazil (79.6 MMT), Argentina (25.4 MMT) or Ukraine (22.1 MMT). Russia said that their 2015 corn harvest is 88.8% complete at 12.4 MMT. Dec 15 Corn settled at $3.66, up 1 3/4 cents; Mar 16 Corn settled at $3.72 3/4, up 3 1/4 cents.

Wheat: The wheat market closed mixed. Egypt bought 240,000 MT of wheat for Dec 21-31 shipment, with half of that being French origin, plus a cargo each from Romania and Russia. US wheat remains priced out of such business. Egypt's Supplies Minister said that the country now has enough wheat bought to last it until the end of April - into the beginning of their own 2016 harvest. The Russian Ag Ministry said that their 2015 wheat harvest was still not quite over at 99.8% complete producing a crop of 64.0 MMT in bunker weight. Winter grain planting in Russia seems to have stalled at 16.3 million ha, or 95.2% of the original government target. Colder air is seen moving into the Volga region next week. Ukraine said that it's winter wheat crop (only planted on 89% of the intended area) for the 2016 harvest has only emerged on 4.1 million ha, or 62% that area. Winter wheat in Ukraine is rated 68% good to satisfactory versus 83% a year ago. Weak/thinned is 32% against 17% this time last year. Unconfirmed reports suggest that Russia has banned wheat exports to Turkey following the shooting down of a Russian jet over Syria earlier in the week. Dec 15 CBOT Wheat settled at $4.79 1/4, down 5 cents; Dec 15 KCBT Wheat settled at $4.57 1/4, down 1/4 cent; Dec 15 MGEX Wheat settled at $5.14 1/2, up 5 cents.

Paris Rapeseed Close To 3-Month Highs

25/11/15 -- EU grains closed mostly higher with Jan 16 London wheat up GBP0.65/tonne at GBP114.45/tonne. In Paris, Dec 15 wheat rose EUR1.75/tonne to EUR177.75/tonne, Jan 16 corn was EUR0.50/tonne easier at EUR167.00/tonne and Feb 16 rapeseed gained EUR5.00/tonne to EUR382.00/tonne.

Fresh news was lacking. Rapeseed, having been the weakest link yesterday, regained the starring role today aided by an improved showing from Chicago soybeans. This was in fact within half a euro of being the best close on a front month since mid-August for Paris rapeseed.

The outlook for another significant fall in EU (and Ukraine) rapeseed plantings for 2016 might be lending some support to that going forward.

Talking of which, the Ukraine Ag Ministry recently said that the country's winter rapeseed crop was only sown on 79% of the originally intended area, with the optimum planting window long since passed.

Sowing of winter wheat in Ukraine has fared a little better, with 89% of the intended area now sown, but only 62% of that is yet emerged. Of what has emerged only 68% is said to be in good to satisfactory condition versus 83% this time a year ago.

Ukraine's grain exports for the season so far now stand at 16.3 MMT, including 8.64 MMT of wheat, 3.65 MMT of barley and 3.95 MMT of corn.

The Ukraine Ministry said that the country would export 16.6 MMT of wheat this season along with 3.9 MMT of barley and 16 MMT of corn.

Egypt's GASC bought 240,000 MT of wheat for late December shipment today, half of which was French origin. They also picked up one cargo each of Romanian and Russian wheat.

Sharply lower freight rates helped French wheat win a good share of the business. Whilst that is good news on the one hand, on the other it also possibly means that other "traditional" North African homes for French wheat like Algeria and Morocco are able to pick up more competitive offers out of the Baltic.

Tomorrow's weekly export licence total out of Brussels will provide a useful barometer to EU exports. Last week's total was a marketing year high of 636 TMT, up 58% on 401 TMT on the previous week. That market will be hoping for that trend to continue.

The market is also keeping an eye on developments between Russia and Turkey following the shooting down of a Russian jet that had allegedly violated Turkey's airspace on Tuesday. Turkey are a huge buyer of Russian wheat and energy, and as we know President Putin is not one to take these things lying down.