EU Grains Mostly A Little Higher, But Harvest Pressure Caps Gains

26/06/14 -- EU grains markets ended the day mostly a little higher, but the impending bumper harvest is capping gains. It would be pretty unusual to see the market put in a strong rally around this time of year, without the aid of a serious weather-scare somewhere around the world, and we haven't really got one of those at the moment.

The day finished with Jul 14 London wheat continuing it's erratic movements, down GBP2.00/tonne at GBP140.00/tonne, and with new crop Nov 14 London wheat GBP0.20/tonne higher at GBP137.20/tonne. Nov 14 Paris wheat ended EUR1.25/tonne firmer at EUR186.25/tonne, Aug 14 Paris corn was up EUR0.25/tonne at EUR173.50/tonne, whilst Aug 14 Paris rapeseed rose EUR0.75/tonne to EUR352.50/tonne.

The Russian Ministry said that the country had harvested 350k hectares of it's 2014 crop so far, producing 1.3 MMT of grains, with early yields averaging 3.75 MT/ha. This time a year ago more than twice that area and volume had been cut.

Rusagrotrans said that Russia would harvest 95.5-98.1 MMT of grains this year (the Ag Ministry currently say 96.8 MMT versus 92.4 MMT in 2013). They said that recent rains in the Central and Volga regions have improved crop conditions there, and that production could ultimately come in at the upper end of their existing range thanks to that.

They estimated production in the South/North Caucasus at 34 MMT - the second highest on record - versus 31.9 MMT a year ago

Elsewhere they see output in the Volga region rising from 17 MMT last year to 19.1-20.6 MMT in 2014, with production in the Urals up from 4.3 MMT to 5.1-5.4 MMT.

They said however that output would fall in Siberia (from 15.3 MMT to 14.9-15.1 MMT) and the Central region (from 22.5 MMT to 20.9 MMT).

Ukraine's Ag Ministry said that growers there had also harvested 1.3 MMT of grains so far this year, with yields averaging 2.76 MT/ha, a 13% rise on this time last year.

MDA CropCast raised their forecast for Russian wheat (up 0.6 MMT), corn (up 0.1 MMT) and barley production (up .01 MMT) from last week due to improved weather conditions. They also raised their view on European wheat (up 0.4 MMT), corn (up 0.5 MMT) and rapeseed output (up 0.58 MMT) due to rain in some of the drier areas.

The trade is still bracing itself for Monday's acreage and quarterly stocks reports from the USDA. Chicago new crop corn has closed with a close to limit move in four of the last five years on the day of this report.

The "usual suspects" on the Black Sea (Russia, Ukraine and Romania) are lining up to be aggressive early season wheat sellers again for the 2014/15 marketing campaign. Further west, France and Germany will be hoping to start picking up some fresh export interest themselves in the coming weeks, in the face of this stiff competition, especially once the harvest there moves into full swing.

It may take until we've got through the critical corn pollination month of July before we see farmers in these same Black Sea areas feeling a bit more confident in their production potential, for them to begin looking to commit to new crop corn sales however. Current new crop corn offers FOB Ukraine are around $205-206/tonne, there's a feeling that this could fall below $200/tonne a bit closer to harvest time.

Late in the day the International Grains Council released their June world supply & demand numbers.

They forecast the global 2014/15 wheat crop at 699 MMT, a 5 MMT hike on last month's estimate. The world corn crop potential was increased by 8 MMT from last month to 963 MMT, and their first estimate on the global soybean crop next season came in at 300 MMT, a 6% rise compared to 2013/14.