EU Grains Mostly Lower, Although London Wheat Posts A Few Rare Modest Gains

28/05/14 -- EU grains markets finished mostly lower on the day, on buoyant crop production and export prospects around much of the world. London wheat managed a rare mostly higher close however, aided by a slightly weaker pound.

The day ended with Jul 14 London wheat up GBP0.25/tonne at GBP147.25/tonne, and with new crop Nov 14 London wheat GBP0.05/tonne higher at GBP144.05/tonne. Nov 14 Paris wheat ended EUR0.50/tonne lower at EUR192.50/tonne, Jun 14 Paris corn slipped EUR2.25/tonne to EUR171.00/tonne, whilst Aug 14 Paris rapeseed fell EUR3.25/tonne to EUR350.00/tonne.

Following on from the Russian Ag Ministry's latest upward revision for 2014/15 grain production of 100 MMT, a 6-year high, they increased their forecast for next season's grain exports from 22 MMT to 25 MMT. That's very similar to this year's anticipated volume of 25-26 MMT, depending on who's estimate you want to go with, and likely to keep a lid on upside price potential if they are correct. This season's exports as of 14 May were 23.7 MMT.

The USDA attaché in Russia estimated the wheat crop there at 52 MMT this year, very similar to a year ago. The Russian Ag Ministry now has it at 53-55 MMT.

Toepfer forecast the EU-28 soft wheat crop this year at 139.15 MMT, up 2.3% on 136 MMT last year. They have UK production at 15.06 MMT, a 26.3% rise on 2013.

They are also forecasting better yields on both German wheat and rapeseed compared to average.

They have Romania's wheat crop at 8.26 MMT versus 7.99 MMT a year ago, and Bulgaria's production at 5.17 MMT compared to 5.06 MMT in 2013.

Ukraine said that corn planting there is done on 4.74 million hectares, or 96% of plan. Soybeans have also been sown on 1.61 million ha (96%) and sunflower on 4.41 million ha (97%).

The HGCA noted that "given the mild winter and favourable growing conditions for the 2014 crop so far, it is logical to start thinking about the prospect of an early harvest this year. However, history is littered with examples, 2007 and 2012 for instance, when crop potential looked good at the end of May – only to be let down by poor weather in the key June/July grain filling period."

They did however sagely observe that "the reality is that the UK weather events of the last four years have masked what a typical UK average yield looks like." I couldn't agree more.

The 2009/13 average wheat yield was only 7.48 MT/ha. The preceding 2004/08 average was 7.86 MT/ha, with a high of 8.30 MT/ha in 2008.

If we work on a 2014 harvested area estimate of 2 million ha, then given the 2009/13 average we will end up with a production figure of 14.96 MMT this year, the 2004/08 average will give us a crop of 15.72 MMT.

Personally, something closer to the latter seems more likely.