EU Grains Mostly Lower, Does Selling The Long Nov London Wheat Provide An Opportunity?

16/10/15 -- EU grains closed mostly lower on the day and for the week, save for rapeseed which made nominal gains versus last Friday, and set a 9-week high earlier in the week.

At the close, Nov 15 London wheat was down GBP0.75/tonne at GBP114.25/tonne. In Paris, Dec 15 wheat fell EUR1.25/tonne to EUR176.25/tonne, Nov 15 corn was unchanged at EUR161.25/tonne and Nov 15 rapeseed was EUR0.25/tonne higher at EUR377.00/tonne.

For the week that puts London wheat GBP2.75/tonne lower, with Paris wheat down EUR3.25/tonne, corn shedding EUR5.50/tonne and rapeseed clawing its way EUR0.25/tonne higher.

Paris rapeseed prices set the largest premium over Chicago soybeans that's been seen since April 2012 this week, the HGCA noted.

"The relative global supply situation of rapeseed and soybeans this season is the main driver behind the diverging price spread; on the whole, rapeseed supplies are tighter this year whereas soybean supplies remain comfortable," they said.

The predicted outlook for firmer plan oil prices for the remainder of the year and into the first half of 2016 on the back of El Nino-related reduced output in Indonesia/Malaysia may also be helping to support rapeseed.

If there's a relative shortage of rapeseed however, there certainly isn't one of wheat, with the world harvesting its third record crop in a row this year.

Europe's soft wheat crop is now seen at all-time highs, by Strategie Grains at least, but exports are lagging last year's pace by some considerable distance.

Brussels confirmed last night that they'd issued 416,000 MT worth of soft wheat export licences this past week, down by almost a third from the previous week. That takes the season to date total to 6.2 MMT, 26% lower when compared to 8.4 MMT this time last year.

EU barley exports are doing better however, with 170,000 MT worth of export licences this week taking the season to date total to 3.8 MMT, some 40.7% more than 2.7 MMT this time a year ago.

EU corn import licences of 185,000 MT take the 2015/16 cumulative total to 2.0 MMT versus 2.4 MMT at this point in 2014/15.

The fact that French wheat was beaten fair and square in yesterday's Egyptian tender, having only narrowly missed out in the previous one, was another bearish factor today.

It is to be hoped that EU wheat exports pick up as the season progresses, let's not forget that the Black Sea are always a thorn in the side at this time of year - whether their harvest has been good, bad or indifferent. It seems to be that this year's wheat harvest there has been good though, and when you add in the fact that Russia's early season sales have been somewhat retarded by the previous export tax (reduced on Oct 1), then we could expect to see them remain a bit more active for longer this campaign.

Russia's 2015 wheat harvest is said to be 98.9% complete at 63.5 MMT in bunker weight, with the barley harvest 98.8% done at 18.1 MMT.

Russian winter grains for the 2016 harvest are said to be planted on 15.0 million ha, down from 15.8 million this time a year ago, and representing 87.9% of the government target.

There's currently a fairly wide divergence between the different weather models as to whether the forecast for the main winter grain belt in Russia is set to be drier or wetter than normal across the next 15 days. Certainly though the past 30 days have been significantly drier than normal in the region. The last 7-14 days has also seen lower to much lower than normal temperatures.

This is one of the main factors providing some degree of support for wheat at the moment, but at the risk of sounding like a broken record this is all very reminiscent of 12 months ago, and yet look at where we are now.

Talking of 12 months ago, Nov 15 London wheat was trading at a GBP15.15/tonne premium (GBP131.60/tonne versus GBP116.45/tonne) to the front month Nov 14 a year ago today. The differential now between the near and long Nov position is almost exactly the same at GBP14.75/tonne. Paris wheat was offering a EUR22.50/tonne premium for the long Dec position over the front month 12 months ago versus only EUR12.75/tonne tonight. That's an interesting fact don't you think?

In other news FranceAgriMer said that the 2015 corn harvest across the Channel was 38% complete versus 21% done a week ago and 15% done a year ago. Winter wheat plantings were put at 39% complete as of Monday versus 23% a week previously and 8 points ahead of this time last year. Emergence is at 14%, similar to 12 months ago. Good progress has been made with sowing of the French winter barley crop, which now stands at 61% planted versus only 37% a week ago and 50% this time last year.