EU Grains Back In The Red, Confusion Over Russian "News"

27/01/16 -- EU grains were mostly back in the red again today, save for rapeseed which was mostly higher, getting a little boost from firmer US soybean prices.

At the finish, new front month Mar 16 London wheat was down GBP1.45/tonne at GBP109.00/tonne, Mar 16 Paris wheat fell EUR2.75/tonne to EUR165.75/tonne, Mar 16 corn was EUR1.75/tonne lower at EUR155.00/tonne and Feb 16 rapeseed eased EUR0.25/tonne to EUR362.50tonne.

The notion that the ever declining value of the Russian rouble might lead Russia to tighten export restrictions on wheat is what has spooked the market a little this week.

The "announcement" such as it was came merely as one of an assorted list of pontifications that are released by the Russian leadership just about every day, and this wouldn't be the first one that's had it's meaning altered in translation. Such is the market that we operate in.

"This morning the Russian First Deputy Agricultural Minister has said that Russia will actually consider a cut or removal of state wheat exports but may impose duties on barley and maize exports," the HGCA said.

So what's going on? The truth is simply that we really don't know.

For now it looks like Russia's 2015/16 wheat exports are running around 3% lower at 21.34 MMT, with wheat shipments at around 16 MMT (to Jan 20). The Russian Ag Ministry say that calendar year 2016 grain exports will total 30 MMT, down 8.5% compared to 32.8 MMT in 2014/15.

The USDA's figures on Russia are pretty similar. They have 2014/15 wheat exports at 23.5 MMT (versus 22.8 MMT last season), barley at 3.8 MMT (3.2 MMT) and corn shipments at 3.8 MMT (3.2 MMT). That gives us combined "grain" exports, excluding the likes of oats and rye, at 30.3 MMT this season, a 4.7% drop on a year previously.

Essentially then, this latest "news" doesn't really look like a game changer on a global level - the volumes we are talking about are too small, and there are too many other eager sellers only too willing to step into the breach.

It does however serve as another useful reminder of what heavily short fund money can do to a market like Chicago wheat.

Meanwhile there are reports that one of the three French wheat cargoes sold to Egypt's GASC that got held up prior to Christmas awaiting letters of credit, is still waiting for customs clearance due to the presence of an unspecified (but probably minute) quantity of ergot. GASC recently introduced a zero tolerance on ergot.

It will be very interesting to see just how over-susbcribed future GACS tenders are, and also what prices they attract. They are doing themselves no favours here.