EU Grains End Mostly Lower, But Rapeseed Supported By Crop Downgrades

08/07/15 -- EU grains closed mostly lower under pressure from outside influences/harvest pressure. Talk of a possible Grexit/debt default and news that the Chinese stock market opened 8% lower, taking it down 30% in the past few weeks, is giving the market the jitters.

At the close Nov 15 London wheat was down GBP1.750/tonne to GBP131.00/tonne, Sep 15 Paris wheat was EUR4.25/tonne easier at EUR196.00/tonne, Aug 15 Paris corn was down EUR2.75/tonne to EUR184.25/tonne, whilst Aug 15 Paris rapeseed was up EUR3.25/tonne to EUR384.50/tonne.

Recent bullish market sentiment hasn’t detracted from the broader price trend yet, says the HGCA's Jack Watts. He notes that despite the recent price rise (until the last couple of days), the Nov 15 London wheat future hasn't yet broken out of the long-term downtrend that has been in place since the start of 2014.

Hot and dry conditions in parts of Europe have raised concerns over crop yields. Put in perspective though, this spell of weather may have come too late to massively impact wheat, although corn and spring barley yields could still be at risk, he says.

Nevertheless, EU wheat production estimates are being trimmed/pared back, if not exactly slashed. Agritel now estimate the EU-28 soft wheat crop at 138.5 MMT, some 2 MMT below their previous forecast and 7% below a year ago.

ODA are even lower at 137.3 MMT, some 2.7 MMT below their previous estimate.

They see production in France at 36.4 MMT versus 37 MMT from Agritel and compared to 37.87 from the French Ag Ministry just yesterday. Output was around 37.5 MMT a year ago.

ODA also estimate the UK wheat crop at around 15 MMT versus 16.6 MMT a year ago, adding that output could fall below that level if dryness persists.

Germany's DBV forecast this year's grain harvest there at 47.1 MMT, down 11% on last year, although they say that this is still in line with the 5-year average of 46.8 MMT. Production last year was exceptional of course.

They have the German winter wheat crop 8.3% lower this year at 25.12 MMT, with winter barley down 10.3% at 8.52 MMT, spring barley down 7.9% at 1.9 MMT and corn production falling 7.2% to 4.77 MMT.

They estimate the 2015 German winter rapeseed crop to tumble 20.5% to 4.96 MMT.

Sticking with that crop, Strategie Grains today forecast the EU-28 rapeseed crop at 21.8 MMT, down 0.5 MMT from their previous estimate and 10.3% below 24.3 MMT a year ago.

They see the French crop at 5.2 MMT versus 5.6 MMT previously and a million tonnes less than a year ago. The French Ministry were at 5.07 MMT for that yesterday.

Bloomberg reported that French analysts Terres Inovia said that the recent heatwave and drought had had a 'major' impact on rapeseed yields in crops on light soils in the North and North Eastern regions of France.

The harvest is progressing rapidly in the Rhone-Alpes, Auvergne and Burgundy regions, where first yields are very variable, from as little as 2 MT/ha to more than 4.5 MT/ha, they said.

Strategie Grains estimate the UK 2015 rapeseed crop at 2.2 MMT, which is broadly in line with other trade forecasts.

Egypt used this latest break as an opportunity to get back into the market, tendering for wheat for Aug 11-20 shipment.

They finished up buying three cargoes, two of Russian origin and one from Ukraine.

Algeria's recently reported 500 TMT of optional origin milling wheat purchase was probably in fact for 700-725 TMT, traders told Reuters. The bulk of that purchase will probably prove to be of French origin, although there could be some German wheat included to, they said.

Algeria have also announced a tender for 100,000 MT of optional origin feed barley today.

Tunisia are in the market for 142 TMT of soft wheat, 50 TMT of durum wheat and a similar volume of feed barley, all of optional origin.