EU Grains Close - Thursday

31/05/12 -- EU grains finished mixed with Jul 12 London wheat down GBP1.50/tonne to GBP171.60/tonne, and with new crop Nov 12 unchanged at GBP155.15/tone. Nov 12 Paris wheat was up EUR0.75/tonne to EUR211.50/tonne.

For the month of May that places Jul 12 London wheat GBP6.40/tonne lower and Nov 12 down a much more modest GBP0.85/tonne. Nov Paris wheat is EUR7.75/tonne higher on the month, much of that due to acute euro weakness.

As the 2011/12 marketing year draws to a close Brussels granted 178 TMT of soft wheat export licences this week, bringing this season's campaign total to a fairly poor 12.0 MMT, 32% down on the 17.7 MMT exported at the same point last season with just four weeks left to go.

So, despite the euro falling to a near two year low against the US dollar, EU wheat isn't exactly flying off the shelves.

EU 2012/13 production prospects have improved considerably in the past couple of months, although eastern Germany, Poland, Slovakia and the Czech Republic could do with some of the recent rainfall that western Europe has been enjoying recently.

Ukraine has also benefited from recent rainfall, with the Ag Ministry there today saying that they could have a grain harvest as high as 50 MMT this year - their third-largest harvest in the past 20 years.

Record corn production could be on the cards once again, with a crop of 26-27 MMT possible. Despite a slump in wheat prospects to 12.0-12.5 MMT this year from 22.3 MMT in 2011, large carryover stocks mean that they could still export a record volume of grain in the 2012/13 season, including 14-15 MMT of corn, 5 MMT of wheat and 2.5-3.0 MMT of barley.

Export duties imposed in the first four months of the 2011/12 season mean that Ukraine's carryover grain stocks into the new season will be 11-12 MMT, far higher than the normal 3-5 MMT of ending inventories, the Ministry estimate.

Russia's production prospects have also improved with "drought-breaking" rains arriving for many areas of European Russia, according to Martell Crop Projections.