USDA And FAO Heap More Gloom Onto Grains Markets

11/07/14 -- EU grains closed mostly lower, helped on their way by a late one-two in the guts from the USDA and FAO.

The day ended with new crop Nov 14 London wheat closing GBP1.65/tonne lower at GBP130.55/tonne, Nov 14 Paris wheat was EUR1.25/tonne weaker at EUR180.50/tonne, Aug 14 Paris corn was down EUR1.25/tonne to EUR169.00/tonne and Aug 14 Paris rapeseed was EUR2.25/tonne easier at EUR331.25/tonne.

This was a new lowest close for a front month on both London wheat and Paris rapeseed since July 2010, and the lowest on Paris wheat since December 2011.

For the week Nov 14 London wheat was down GBP3.95/tonne, with Paris wheat falling EUR4.00/tonne, corn losing EUR2.00/tonne and rapeseed falling EUR6.50/tonne.

FranceAgriMer said that the French winter wheat harvest is just about underway, at 2% done nationally as of Jul 7. This time last year nothing had yet been cut. Despite some rain this week, the winter barley harvest advanced from 44% done a week ago to 78% complete as of Monday. A year ago only 4% of the crop had been cut by the end of the first week in July. They also said that 7% of the French corn crop is at the silking stage, up from 1% a week ago and versus zero this time last year.

As far as crop conditions go, they rated 70% of the French winter wheat crop to be in a good/very good state, up a point on a week ago and 2 points ahead of this time last year. The French corn crop was rated 83% good/very good, unchanged on a week ago and far better than only 56% this time in 2013.

Late in the day the USDA raised their estimate for the world wheat crop in 2014/15 by 3.6 MMT from last month to 705.2 MMT.

"This is down 9.0 MMT from last year but still the second largest production on record. The biggest foreign increases are 1.6 MMT for the EU and 1.0 MMT for Ukraine both due to continued favourable weather," they said. Production in the EU is now forecast at 147.9 MMT, a 3.2% increase on last year. Ukraine's crop is now estimated at 21 MMT, down versus 22.3 MT a year ago, but nowhere near as bad a crop as was feared earlier in the year.

World wheat ending stocks in 2014/15 were raised by almost 1 MMT to a plentiful 189.5 MMT, which is more than 5 MMT higher than in 2013/14.

The FAO's OECD meanwhile estimated the global wheat crop in 2014/15 even higher than the USDA, at 710.5 MMT, which they say is 18.4 MMT above the prior 3-year average.

They also forecast the world 2014/15 coarse grain crop at 1.273 billion tonnes versus the previous 3-year average of 1.208 billion and the USDA's 1.261 billion.

"For coarse grains, the production response to the high prices in recent years is expected to be especially strong in the United States, the Russian Federation and Argentina. Global demand will not be able to absorb this supply at current prices," they said.

"Crop prices are expected to drop for one or two more years, before stabilizing at levels that remain above the pre-2008 period, but significantly below recent peaks," they suggested.