EU Grains Mostly Higher, Black Sea Uncertainty Prevails

04/03/14 -- EU grains finished a choppy session mostly a little higher, despite trading lower for much of the day as tensions between Russia and Ukraine eased somewhat. Trade houses such as ADM and Bunge say that operations within Ukraine are "normal" and that exports continue relatively unhindered.

Mar 14 London wheat ended GBP0.50/tonne higher at GBP161.50/tonne, and with new crop Nov 14 GBP0.15/tonne firmer at GBP152.20/tonne. Mar 14 Paris milling wheat was EUR1.25/tonne lower at EUR207.25/tonne, Mar 14 Paris corn was EUR2.00/tonne weaker at EUR170.25/tonne and May 14 Paris rapeseed added EUR2.00/tonne to post a new near 8-month closing high of EUR402.00/tonne.

The local Ag Ministry said that Ukraine's grain exports for the season so far are at 24.7 MMT, up 36.8% on a year ago. That includes 7.43 MMT of wheat, 2.14 MMT of barley and 14.89 MMT of corn. The USDA currently have Ukraine's full season exports at 10 MMT for wheat and 18 MMT for corn, meaning that around 2.5 MMT of wheat and 5 MMT of corn remains unshipped so far.

They Ministry added that Ukraine shipped 2.82 MMT of grains in February, most of which (2.33 MMT) was corn. They said that the country has exported a further 340 TMT of grains in the first three days of March.

Strategie Grains said that the EU-28 OSR crop will amount to 21.5 MMT this year, up from the 21.4 MMT forecast previously and 1.9% up on the 21.1 MMT produced in 2013/14. Despite wetness issues in the UK and France, yield potential hasn't yet been diminished, they added.

Algeria seeks 50,000 MT of optional origin milling wheat for May shipment. Jordan is in for 100,000 MT of optional origin feed barley for May/Jul delivery.

The Turkish Grain Union said that wheat yields there will decline 14% this year due to drought.

ABARES forecast the Australian 2014/15 wheat crop at 24.8 MMT, down 8% versus 27 MMT last year. Despite that though, exports will rise from 18.5 MMT to 19.1 MMT, they added. They see the wheat planted area up 130k ha to 13.6 million ha, but currently forecast yields lower.

The Australian canola crop was estimated at 2.948 MMT versus 3.548 MMT a year ago.

Winter wheat crop conditions in the US remain in decline. The latest monthly reports show Kansas good/excellent down 1% versus a month ago to 34% (although that's still better than only 23% a year ago), with Nebraska down 3% to 43%, Oklahoma down 5% to 31% and Texas falling 4% to 15%.

The current situation remains extremely volatile, and could flip to bearish at any moment, depending upon the latest developments in the Black Sea region. It seems unlikely that the West will want to risk military intervention in the area. It also seems unlikely that Big Bad Vlad will want to back down, however.

Will the West simply allow Russia to annexe the Crimea, or even a larger part of eastern Ukraine? If not, what sanctions/repercussions will the West propose? Bearing in mind that Russia is a very major gas supplier to Europe. Do we need them more than they need us, or is it the other way around?