EU Wheat Prices Rise On Weak Currencies, Declining Russian Hopes

09/07/13 -- EU grains closed firmer as both the pound and euro fell sharply against the dollar, with Nov 13 London wheat ending GBP2.75/tonne higher at GBP169.45/tonne and Jan 14 also closing up GBP2.75/tonne to GBP170.75/tonne. Nov 13 Paris wheat rose EUR3.25/tonne to close at EUR196.75/tonne.

The vibe coming out of Russia is that this year's grain crop might only be average at best. Whilst the harvest currently stands at 14.4 MMT, with wheat accounting for 12.1 MMT of that and yields up 26% versus this time a year ago at 3.28 MT/ha, the feeling is that yields will start to decrease as the harvest progresses into spring grains.

Spring grain crop conditions have deteriorated, particularly in the south and Volga regions, under conditions which have been hot and dry for the past couple of months. One report suggests that spring production potential this year is "much lower" than in 2011, and in some places even worse than last year's dismal performance.

The Russian Ministry remain upbeat for now, sticking by a grain production estimate of 95 MMT, with exports at 20 MMT. They did however throw in a little caveat however that they may lower this estimate as the harvest progresses. The Russian Weather Centre downgraded their production estimate to 90-94 MMT today, following the lead of IKAR and SovEcon who both cut their forecasts yesterday to 91.9 MMT and 83-87.5 MMT respectively.

The French Farm Ministry estimated the French soft wheat crop at around 35.9 MMT, including a small quantity of spring wheat, a modest increase versus 35.5 MMT a year ago. Barley production is forecast at 10.445 MMT down 7.9% compared to 11.341 MMT in 2012, with the OSR crop at 4.434 MMT, down 18.8% versus 5.463 MMT last year.

Oil World estimated the French OSR crop higher at 5.0 MMT. They also increased their German crop forecast from 5.5 MMT to 5.8 MMT, a near 21% increase on 4.8 MMT last year. The UK crop was estimated down 23% at 2.0 MMT, with the EU-28 crop as a whole seen up 6.25% at 20.4 MMT. A large rebound in production in Ukraine is also on the cards, with Oil World forecasting a crop of at least 2.0 MMT versus 1.3 MMT in 2012.

DBV forecast a German grain crop of 45 MMT, with winter wheat production seen at 23 MMT, off 3 million hectares with yields at 7.6 MT/ha. Good to above average yields are expected in the areas not affected by the flooding a few months back, they said.

The Ukraine grain harvest stands at 10.5 MMT, including 7.38 MMT of wheat, say the Ag Ministry. Average yields are said to be 2.64 MT/ha versus 1.96 MT/ha a year ago at this time, and should improve as the harvest progresses north and west. The country exported 261,800 MT of grains in the Jul 1-8 period, including 51,300 MT of wheat and 151,700 MT of corn.