EU Grains Rise, Are The Lows Now In?

06/10/14 -- EU grains began the week strongly, racing sharply higher early in the session, although giving up some of those gains by the close.

The day ended with Nov 14 London wheat up GBP2.00/tonne to GBP113.50/tonne, Nov 14 Paris wheat closing EUR1.75/tonne higher at EUR160.25/tonne, Nov 14 Paris corn was up EUR2.50/tonne to EUR144.00/tonne, whilst Nov 14 Paris rapeseed was EUR6.25/tonne firmer at EUR331.25/tonne.

For Nov 14 London wheat, which reached GBP116.50/tonne at one point, this was the highest close since Sep 17, and for Paris wheat it was the first finish above EUR160/tonne since the same date. For rapeseed it was the highest close since Jul 14.

The question that everybody is asking is "are the lows now in?" We probably won't know the answer to that until at least next week, depending on what the USDA have to say on Friday.

It was interesting to see rapeseed put in such a strong performance on a day when Strategie Grains increased their forecast for the EU-28 2014 rapeseed crop to a new record 23.8 MMT, up from 23.2 MMT previously and almost 13% above last year's 21.1 MMT.

The new figure is 400 TMT higher than the USDA's current estimate and less than 1 MMT away from the EU-28's projected consumption requirement this season (set at 24.7 MMT by the USDA).

The French analysts forecast the EU-28 rapeseed area for the 2015 harvest at 6.5 million ha, down a relatively modest 3% versus this year.

The French Farm Ministry estimated this year's corn crop at 16.3 MMT, up 11% on last year. Some private estimates are considerably higher, in the 17-18 MMT range. The Ministry placed this year's French wheat crop at 37.5 MMT, up 1.7% on last year, with barley production up 14% to 11.75 MMT.

The French markets got a boost today from the continuing weakness of the euro, which will aid exports. These have already been buoyant so far this season.

Today's strength in London wheat is a bit more difficult to explain, and can perhaps be best attributed to a technical recovery from a 5-month long price slump. "I think that one or two shorts got spooked a little by the early strength and decided to bank some profits and get out," one trader told me.

The rise won't make UK feed wheat any more competitive on the export front though. Meanwhile the domestic end user remains well covered, at least through until Christmas. Feed demand is relatively slack, and there are plenty of other attractively priced raw materials to pick from. The farmer's reluctance to sell is currently well matched by the feed compounder's apathy with regards to buying!