EU Grains End Lower On The Day, But Higher For The Week

22/05/15 -- EU grains closed mostly lower on the day, but mostly with some fairly decent gains for the week

At the finish, May 15 London wheat was unchanged at GBP111.20/tonne, Sep 15 Paris wheat ended EUR2.50/tonne lower at EUR182.50/tonne, Jun 15 Paris corn fell EUR0.25/tonne to EUR154.25/tonne whilst Aug 15 Paris rapeseed was down EUR0.50/tonne to close at EUR359.00/tonne.

For the week though, nearby London wheat added GBP3.10/tonne, and in Paris wheat gained EUR8.00/tonne, corn was half a euro lower and rapeseed advanced EUR5.25/tonne. The old crop/new crop spread on London wheat narrowed a little, down from GBP11.90/tonne a week ago to GBP11.25/tonne tonight, but that's still a pretty cavernous gap.

EU exports continue to run at record levels, with Brussels issuing 647 TMT worth of soft wheat export licences this past week, taking the season to date total to 29.1 MMT, up more than 12% on this time a year ago. They also released 356 TMT worth of barley export licences, taking the season to date total to 8.4 MMT, a 58.5% hike compared with this time last year.

The weak euro continues to help, with the pound closing the week above 1.40 versus the single currency. The outlook for further euro devaluation ahead, with Barclays this week predicting sterling to rise to 1.45 by the end of the year, should help exports, although competition from the Black Sea will be fierce as usual. The weak euro won't help shift the UK's large exportable surplus though.

"A big crop, combined with low farm gate prices, has led to the situation where there is almost 60% more wheat forecast to be in commercial end season stocks than last year, according to the latest update from Defra," note the HGCA.

As well as offering a large premium to carry old crop into new crop in the UK, it is also noteworthy that the market is tonight paying an additional GBP10.55/tonne to carry wheat from the 2015 harvest into 2016! That's 8.6%, compared to only a 4.1% premium in Paris.

In their latest forecasts for the season ahead, Rabobank estimated Paris wheat prices at EUR185/tonne in the final quarter of the year, which is almost exactly where the market closed tonight.

Strong Black Sea exports are expected, especially in the first half of 2015/16, as sellers there traditionally aggressively market their grain as early in the season as they can regardless of how good a production year they have had.

Rabobank currently estimate Russia's wheat crop at 54-55 MMT, which combined with large carryover stocks should allow for exports of more than 20 MMT in 2015/16, they say. That's around the same volume as they have shipped out so far this season.

The Ukraine wheat crop, estimated at 22-23 MMT, should allow for exports of around 11 MMT, they add. Again that's very similar levels to this season.

Rabobank forecast an EU wheat crop 149 MMT this year, and think that exports in 2015/16 might fall around 10% to 30 MMT.

In other news, Russian spring grain planting is around 61% complete on 19 million ha, say the Ag Ministry there. That's 2.8 million ha less than this time a year ago. Krasnodar, Stavropol and the Kursk region are finished planting, but the Volga (67% done), Siberia (43.6% complete) and the Urals (21.6% sown) are the areas that are lagging, they say. Heavy rain is being blamed for the delays, which is also the case across the border in Kazakhstan where it has been very wet indeed.

Egypt have been less active than normal on the wheat import front. GASC say that they've already bought 4 MMT of new crop wheat on the domestic market, which exceeds the government target by 0.3 MMT. It's not surprising that they have done so well, the price they pay local farmers is the equivalent of around $367/tonne!

Algeria have been more active internationally, they bought 450 TMT of what is believed to be mostly French wheat for August shipment today at prices said to be around $213-214/tonne C&F. Tunisia, another traditionally big buyer of French wheat, will also need to be more active, their 2015 grain harvest is estimated to be around 30-50% lower due to lack of rain.

The French still look likely to be on target for a very good, and possibly record wheat crop this year. FranceAgriMer said today that 91% of the French wheat crop was in good to very good condition, unchanged on a week ago and far better than 76% this time last year. Winter barley rated good to very good was 90%, the same as last week and 17 points better than a year ago. Newly planted corn was also rated 90% good to very good.

They said that 58% of French wheat was headed versus 26% a week ago, but still a little retarded compared to 67% a year ago. Winter barley is now 100% headed. Corn is 98% planted and 89% emerged, they added.