Paris Grains Jump Whilst London Sleeps

26/08/13 -- Whilst the London market was closed for the August Bank Holiday, French grains followed the lead of the overnight US Globex market, opening sharply higher and posting strong gains at the close.

Nov 13 Paris milling wheat settled EUR6.25/tonne higher at EUR191.75/tonne, Nov 13 Paris corn settled EUR6.75/tonne firmer at EUR177.00/tonne and Nov 13 Paris rapeseed jumped EUR12.50/tonne to EUR389.00/tonne.

US soybeans led the charge for a second session in a row on US weather concerns, and everything else just went with them wheat included, even though it lacks a really strong bullish storyline of its own.

Saudi Arabia bought 720 TMT of hard wheat for Nov/Dec delivery over the weekend, which helped provide additional support. The origins were said to be EU, North America, South America, and Australia.

News that the first French wheat shipment to China in around 9 years is expected to load 63 TMT of soft wheat at the northern port of Dunkirk later this week added a bit of extra bullish sentiment. The shipment forms part of a 220 TMT purchase made earlier in the year for Aug/Oct delivery. That was said to be China’s first significant purchase of French wheat since the 2004/05 season.

The EU Commission's MARS unit said that "since the beginning of July, major parts of Europe experienced weather conditions with above-average temperatures and below-average rainfall. Dry and hot conditions have particularly affected summer crop growth in northern Italy and parts of Hungary, Austria, Slovenia and Croatia. Abundant rainfall was recorded over large parts of the British Isles, Scandinavia, the Baltic countries, south- eastern France and the Alpine region," they said.

"On balance, the EU-28 outlook for cereals remains favourable and well above both last year’s levels and the 5- year average, and largely confirms the forecast of July," they added.

They marginally raised their forecast for the average 2013 EU-28 soft wheat yield from 5.69 MT/ha to 5.71 MT/ha, a 5.3% increase on last year. Barley yields were also tweaked higher, from 4.78 MT/ha to 4.80 MT/ha, a 9% increase versus 2012. The average OSR yield estimate was also nudged a little higher, from the 3.08 MT/ha forecast last month to 3.10 MT/ha, a 0.5% drop versus last year. Corn potential was cut from 7.22 MT/ha to 6.97 MT/ha, although that's still a 14.7% rise on year ago levels.

For the UK they placed wheat yields at 7.73 MT/ha, 16.1% up on last year and a little above the 5-year average of 7.66 MT/ha. They have spring barley yields at 5.44 MT/ha and winter barley yields at 6.62 MT/ha, both up versus last year and the 5-year average. Average OSR yields in the UK were forecast at 3.32 MT/ha, a little lower than last year and the 5-year average.

"Cold weather conditions characterised most of the growing season in the UK and Ireland, and the effects of these unfavourable weather conditions are still noticeable, although temperatures in July were above average. Moreover, heavy storms since the end of July have limited production rates," they noted.

The Russian grain harvest now stands at 57.9 MMT off just over half (50.9%) of the planned area. Wheat accounts for 38.5 MMT of that total off 53.3% of the planned area with yields averaging 2.88 MT/ha, a rise of 43.3% versus 2012.

There's talk of some possible freeze damage to newly planted winter wheat in Argentina to add to what appears to be confirmed production losses across the border in Brazil. Whilst this is grabbing some headlines it should be noted that both countries combined only produced around 15 MMT of wheat last year - what we would consider to be an average crop for the UK.

Whilst there are still a few question marks over the size of the US corn crop then wheat could have arrested the slide, at least for now.