EU Grains Follow US Lead In Afternoon Trade

09/11/15 -- EU grains were mixed, but mostly a bit lower in morning trade, although a weaker tone to US markets once they opened - led by wheat - filtered through into afternoon dealings and everything closed on the red.

Breaking outside of the recent range-bound region that we had been stuck in since the last day of September (EUR175-181/tonne) seems to have tired Paris wheat out, at least for the time being.

At the close, Nov 15 London wheat was down GBP0.25/tonne at GBP114.75/tonne. In Paris, Dec 15 wheat was EUR2.00/tonne lower at EUR183.75/tonne, Jan 16 corn was EUR3.00/tonne easier at EUR169.00/tonne and Feb 16 rapeseed crashed EUR6.25/tonne to EUR375.50/tonne.

After hitting close to 1.42 against the euro last week, the pound seems to have stabilised for now around the 1.40 mark versus the single currency. Whether sterling can hold at or around that level will now be interesting The fact that the UK interest rate outlook has become much more unclear than it seemed a week ago could mean that there's a bit more downside for the GBP/EUR yet due to the overbought nature of sterling.

That could provide some abeit modest support for London wheat, although a bit of sterling weakness is unlikely to unlock any huge floodgates in terms of export activity. Paris wheat may have nudged north of it's recent trading range, but Nov 15 London wheat still hasn't finished outside GBP112.50-117/tonne since September 22.

Demand from the livestock sector is tepid, and last week's numbers on UK Human and Industrial wheat usage hardly paint a rosy picture either as far as the demand side of the equation goes.

Despite all the talk of possible problems with Russian and Ukraine winter grains, these are issues that we are many, many months away from knowing the full implications of. Both are still exporting grains nearby with gay abandon, and that is what the EU is dealing with head-to-head right now, with our own soft wheat shipments now 31% below what they were a year ago, despite a record crop to shift.

APK Inform report that Ukraine seaports shipped out 715.2 TMT of grains last week, including 463,3 TMT of wheat (or 65% of the total volume), 191 TMT of corn and 60.9 TMT of barley.

Russian seaports meanwhile exported 638.1 TMT of grains, of which 507.4 TMT (60%) was wheat, 33.8 TMT was corn and 93.7 TMT was barley.

Russian customs data shows that the country's calendar year grain exports to date are 29.03 MMT. Wheat accounts for 60%, or 17.42 MMT, or that total. Season-to-date exports (from Jul 1) are 16.38 MMT, of which 72%, or 11.75 MMT, is wheat.

Ukraine said that their 2015 grain harvest is now 96% complete at 57.1 MMT. This year's corn harvest is 86% done at 19.3 MMT, implying final production of around 22.4 MMT. The Ukraine soybean harvest is 96% complete at 3.6 MMT, and the sunflower harvest is 99% done at 10.8 MMT.

Spanish analysts AgroInfoMarket estimate the 2016/17 soft wheat crop there at 5.67 MMT, up 8.6% on this year, although winter/spring rains, or the lack of, could easily change all that between now and next harvest. They see the nation's imports at 3.75 MMT, down a little on 3.88 MMT this season.

The 2016/17 Spanish barley harvest is forecast 10.3% higher at 7.47 MMT, with imports dropping 27.6% to 0.55 MMT. The Spanish corn crop is seen at 10.92 MMT next year, up 4.8%, with imports falling 2.4% to 6.1 MMT.

The market needs some direction. Maybe tomorrow's USDA WASDE report will provide it? I wouldn't want to put too much money on it though....