EU Grains Mostly Higher On Concerns Over Russia/Ukraine

25/11/14 -- EU grains closed mostly higher, with London wheat closing above GBP130/tonne and Paris wheat over EUR180/tonne for the first time on a front month since July.

At the finish Nov 14 London wheat was up GBP1.95/tonne at GBP131.00/tonne, Jan 15 Paris wheat was EUR1.75/tonne higher at EUR180.50/tonne, Jan 15 Paris corn was unchanged at EUR153.25/tonne, whilst Feb 15 Paris rapeseed rose EUR2.75/tonne to EUR344.75/tonne.

EU wheat exports are defying expectations of a fall of around 12-17% in 2014/15 by continuing to run ahead of last season's record pace, aided by the weak euro and strong dollar.

The jungle drums meanwhile are already beating loudly regarding the health, or otherwise, of Russia's newly planted winter wheat crop.

The Russian Ag Ministry say that winter grain planting has now been completed on 16.8 million hectares, around 85% of which is typically wheat. That's a lot better than 12 months ago when only 15.1 million ha had been planted at this time, due to persistent autumn rains.

Too much rain isn't the problem this year though, it's the lack of it, that is why leading Russian analysts SovEcon are currently forecasting a 2015 Russian grain crop of less than 90 MMT, a drop of more than 20 MMT on this year. Wheat production will fall below 50 MMT next year, they estimate.

The Russian Ag Ministry say that the 2014 harvest is 97.3% complete at 110.1 MMT, including 62.2 MMT of wheat off 97.2% of the intended area and 11.0 MMT of corn (off 92.2% of plan). That leaves them in line to harvest the second largest crop in the post Soviet era this year. The acute weakness of the rouble however - down by almost a third against the US dollar since the turn of the year - is encouraging Russian farmers to hold onto their grain, rather than sell it.

The demise of the rouble, and lack of access to credit, may also significantly impact upon farmers' ability to fund the purchase of seed, fertiliser and agrochemicals next spring. Some may resort to planting home-grown seed, with subsequent yield losses. A lack of adequate spraying and fertiliser applications would also have a negative impact on yields.

A similar situation may be replicated in troubled neighbouring Ukraine too. Dryness there means that 18% of winter crops have emerged in poor condition. A further 850-860,000 ha hasn't sprouted at all. The Ukraine hryvnia meanwhile is down by almost 50% against the US dollar this year, making the funding of inputs there also out of many farmers' reach in 2015.

Weather forecasters are now predicting temperatures of -20 C to hit Ukraine by the middle of next month, which could cause further losses amongst crops unprotected by snow.

At home, Agrii estimate UK winter OSR plantings to have fallen 10% this year to around 620,000 ha - a 6 year low. This is partly due to current low prices and also concerns over pest damage due to new EU neonicotinoid pesticide rules.

Similar concerns are thought likely to have cut OSR plantings in France, Germany and Poland too.