EU Grains Post Mostly Small Gains, But Large Harvests Weigh

07/09/15 -- With the US closed for the Labor Day Holiday, EU grains were left to paddle their own canoe, and managed to put on generally small gains in predictably subdued trade to start the week.

Front month Sep 15 Paris wheat remains vulnerable ahead of the contract's expiry on Thursday, and posted a new lifetime contract low of EUR143/tonne today. That's the equivalent of around GBP104.50/tonne as this year's record crop and thus far slack exports weigh.

At the close, Nov 15 London wheat was unchanged at GBP111.00/tonne. In Paris Sep 15 wheat recovered to close up EUR1.25/tonne to EUR149.00/tonne, Nov 15 corn also gained EUR1.25/tonne to end at EUR162.75/tonne and Nov 15 rapeseed rose EUR0.50/tonne to EUR357.75/tonne.

APK Inform reported that Ukraine seaports exported an impressive 810.6 TMT of grains last week, up nearly 27% on the previous week. That total included 565.2 TMT of wheat, 241.4 TMT of barley and just 4 TMT of corn. That may mean that corn exports are more or less done until the 2015 harvest gets going in earnest, we shall have to see.

Only a small volume of new crop corn has been cut there so far - 27k ha. Early average yields are only 4.39 MT ha though. The USDA has final yields a year ago at 6.15 MT/ha and sees that rising to 6.59 MT/ha this year.

After a slow start, Russia's exports are now picking up, with 672.7 TMT of grains exported last week, a 35% increase on the previous week. That included 633.1 TMT of wheat, 26.3 TMT of barley and 10.1 TMT of corn.

Russia's Jul 1 - Sep 2 grain exports are down 19% year-on-year at 5.78 MMT, but they were 46% lower as of four weeks ago, so things have certainly picked up. Season to date exports consist of 4.35 MMT of wheat, 1.21 MMT of barley and 184 TMT of corn.

The Russian government said that they will resume their intervention purchasing programme on 15 Sep. This year's campaign was suspended due to lack of interest, with only a few sales made by local producers - exclusively in the Crimean region where growers will struggle to move their grain to outside markets. The prices on offer are still not great due to the recent fall in value of the rouble.

Domestic prices for so called 3rd grade wheat are above the price the government is currently offering to pay at around RUB10,000/tonne, and up 43% versus around RUB7,000/tonne this time a year ago.

Meanwhile this year's Russian grain harvest is said to be 64% complete on just over 30 million ha producing a crop of 77.4 MMT to date.

That includes 52 MMT of wheat off 68% of the planned area, with yields averaging 2.84 MT/ha, down 9.8% on this time last year.

The Russian corn for grain harvest is said to be 7.5% complete on 210k ha, producing a crop of 1.1 MMT to date. Average yields of 5.04 MT/ha are only slightly down on last year and are now in line with the USDA forecast for the season.

At home, UK farmers will be cracking on with attempting to wrap up the 2015 wheat harvest. After a largely fine weekend across almost the entire country good progress should have been made, and the outlook for the rest of the week is generally favourable.

Most UK traders will now probably be factoring in a crop of 15.75-16.0 MMT this year, although there's also now some talk of production in excess of 16 MMT. The HGCA have yields currently averaging 8.3-8.6 MT/ha versus last season's record 8.58 MT/ha. Whilst harvesting in the south is nearing completion, there was still plenty left to cut in the north as of last week.

Note though that much of what was left to harvest should contain a much higher proportion of potentially higher yielding feed wheat, and also feature crops grown on generally heavier soil types. Both those factors could boost the national average yield towards the upper end of the current HGCA scale.

The HGCA have the total UK wheat area at 1.87 million ha. A yield of 8.6 MT/ha would push final production slightly above 16 MMT assuming their planting figure to be correct. A planted area of 1.90 million ha (they were after all higher than that at 1.927 million for the 2015 harvest) and an average yield of 8.6 MT/ha would take total production up to 16.34 MMT.

Better than expected UK production and a much larger than normal domestic carryover from last season would put total wheat availability in 2015/16 at levels that could prove difficult to move given sterling's relative strength versus the euro - the latter being a factor that most analysts are forecasting to continue well into 2016.

The crop isn't entirely in the barn yet, but already 2015/16 is looking like another challenging season. Still, at least we beat San Marino!