EU Grains End Mixed, Wheat Remains Under Pressure On Quality Issues

01/08/14 -- EU wheat closed mixed. Both London and Paris wheat slumped to fresh 4-year lows, with the front month in London trading below GBP120/tonne at one point, and Paris wheat slipping beneath EUR170/tonne, before managing a small pre-weekend recovery in afternoon trade.

The day ended with new crop Nov 14 London wheat closing GBP0.10/tonne lower at GBP122.00/tonne, Nov 14 Paris wheat was EUR1.25/tonne firmer at EUR171.75/tonne, Aug 14 Paris corn was up EUR1.25/tonne to EUR163.50/tonne and Nov 14 Paris rapeseed fell EUR4.50/tonne to EUR328.00/tonne.

For the week that puts London wheat GBP4.30/tonne (-3.4%) lower, with Paris wheat down EUR8.00/tonne (-4.5%), corn up EUR7.25/tonne (+4.6%) and rapeseed EUR0.50/tonne higher (+0.2%). Note though that Aug 14 corn is still old crop, the more active and new crop Nov 14 future closed EUR0.75/tonne lower on the week.

Rain at precisely the wrong time seems to have consigned a much larger proportion than normal of this year's French wheat crop to the feed bin. There are concerns of similar problems too in Germany and possibly Poland as well, although harvesting there is less advanced.

However, just because it's in the feed bin, doesn't necessarily seem to mean that it can't be delivered against the MATIF milling wheat contract it would seem, hence the erosion of the premium over feed that had been available on that contract.

FranceAgriMer said today that the French wheat harvest was 76% complete as of Monday, up from 44% done a week previously and versus only 26% this time a year ago. The French winter barley harvest is now complete and even 67% of the spring barley crop is already in the bin, up sharply from 15% a week ago and far higher than just 11% this time last year. They said that 88% of the corn crop is silking versus 62% a week ago and more than double the 42% of a year ago.

With the harvest well progressed it's hardly worth reporting on crop condition ratings, save for those for corn which were unchanged on a week ago at 84% good/very good, which is considerably improved on 54% this time last year.

The German wheat harvest is estimated to be around 45-50% complete, whilst in Poland it's said to be perhaps only 20% done.

Meanwhile dry weather in Russia has allowed them to make excellent progress with their harvest and also seems to mean that quality there is high. The latest figures from the Ministry show that they've now passed the 50 MMT mark (in bunker weight), up 35% on progress this time a year ago. Average yields are said to be 3.4 MT/ha, up almost 22% on a year ago.

Western sanctions against Russia don't appear to be having any effect on grain exports for the time being, buyers in the Middle East and North Africa are more concerned with who has the quality that they want, and who's price is the cheapest. In most cases at the moment the answer seems to be Russia.

Ukraine will also prove to be a thorn in the side again this season. Agritel say that the Ukraine authorities are estimating a grain crop of 58.2 MMT, that's down from last year's record 63 MMT, but still the second highest ever. There are also said to be significant volumes of old crop grain being carried over into 2014/15 in Ukraine.

The Ag Ministry forecast a 20.5 MMT wheat crop, with barley production at 7.3 MMT and corn output reaching 28.4 MMT. Exports in 2014/15 will be 8.5 MMT, 2.5 MMT and 20.65 MMT in that order, they estimate.

Belarus say that they've currently harvested 5.13 MMT of grains off 53% of the planned area, leaving them on target to hit the record 10 MMT crop that they are aiming for this year.

A large European and FSU corn crop again this year, coinciding with what looks like an unusually large EU feed wheat harvest, points to a glut of feed grain on the market in 2014/15. That's why the market is where it is at the moment. The bears would say that it's only going to get worse once we get harvest pressure from new crop corn as well.

What would the bulls say? I don't know as I haven't found one yet. Something WILL turn the market around, it always does. We just don't know what it will be, when it will happen, or how low prices might go before then.