EU Grains End Day And Week In The Red

13/11/15 -- It was another bad day for the EU grains market, red across the board at the close, and with all showing significant losses for the week as well.

At the close, Nov 15 London wheat was down GBP0.35/tonne at GBP112.55/tonne, Dec 15 Paris wheat was down EUR2.25/tonne at EUR177.00/tonne, Jan 16 Paris corn was EUR1.00/tonne weaker at EUR166.00/tonne, whilst Feb 16 Paris rapeseed fell EUR2.25/tonne to EUR372.50/tonne.

For the week that puts London wheat GBP2.45/tonne lower, with Paris wheat down EUR8.75/tonne, corn EUR6.00/tonne easier and rapeseed EUR9.25/tonne easier.

For wheat certainly the story is one of bumper global production (record in fact for a third year in succession) and the prospect for output at similar levels in 2016, only modest demand, fierce competition and rising stocks.

"2015/16 French soft wheat closing stocks could be more than double last year’s figure and the highest since 1999/00, according to the latest supply and demand estimates published by FranceAgriMer yesterday," note the HGCA today.

Total EU soft wheat export licenses to date meanwhile are 31% below year ago levels, even though the USDA only forecast total wheat exports in 2015/16 to decline 6.8% year-on-year.

Euro weakness should help, but there's already a lot of lost ground to make up, and there's been a marked lack of evidence that this has helped that much so far this season.

Wheat carryover stocks at the end of 2015/16 therefore look like being rather high. The USDA currently has these at 16.34 MMT, a 22.7% increase versus the end of last season - and that assumes that we can reach their ambitious export target this campaign.

As far as global wheat plantings for the 2016 harvest go, the IGC recently forecast these at 221.0 million ha, down only marginally on 222.2 million a year ago, and slightly above the recent 5-year average.

For sure there are concerns surrounding the health of newly planted winter wheat in Russia and Ukraine in particular, but whether these possible shortfalls will ultimately prove to be a "game changer" for the global wheat market is far from certain.

UkrAgroConsult forecast the 2016 Ukrainian wheat harvest at 19 MMT in their first tentative peek into next year. That's down sharply from around 26.5-27.0 MMT this year, although this production loss could be tempered by an increase in corn output in Ukraine next year due to a rise in spring plantings and better yields than have been achieved this year.

This situation could also be replicated in Russia. IKAR recently forecast their 2016 grain crop at 96-101 MMT, without giving an individual crop breakdown. That's likely to consist of a wheat shortfall, being partially compensated for by a rise in corn production also.

This assumes of course fair spring and summer growing conditions in the FSU, but at this early stage we can't really factor in anything else.

In Europe, winter wheat plantings are winding down. FranceAgriMer say that the French crop was 95% sown as of Monday, and that 97% of the crop is rated good to very good - so there's no early cause for concern there in Europe's largest producing nation.

There are reports of one or two areas of dryness concern in Europe - parts of Poland for example - but crops here seem largely well established ahead of winter. The near GBP14.00/tonne premium currently on offer for Nov 16 London wheat over the front month Nov 15 looks tempting as it represents almost 12.5% gain. That's also a lot better than a less than 7% premium on offer in Paris for Dec 16 wheat over the Dec 15 market.