EU Wheat Higher Again As Russia Weather Woes Add To Those Of The US

09/07/12 -- EU grains closed sharply higher with Nov 12 London wheat up GBP4.50/tonne to GBP185.00/tonne and Nov 12 Paris wheat EUR6.75/tonne firmer at EUR248.75/tonne. Needless to say, both set fresh contract highs once again today.

US grains were sharply higher, with corn climbing the daily 40 cent limit, in afternoon trade following another dry weekend. Temperatures are seen moderating quite significantly over the next few days, but with precious little rainfall relief this side of next weekend.

To add to the weather woes parts of southern Russia got up to two thirds of their annual rainfall expectations in just a few hours at the weekend, with reports of more than 170 dead as flash flooding hit the region, including the major Black Sea port of Novorossiysk.

It is too early to know what damage may have been done to the local infrastructure, as well as to grain stored at the port and also relatively antiquated inland storage facilities. Authorities say the current disaster is "unprecedented" and that the damage caused is still being evaluated, although Novorossiysk port is said to have re-opened for business.

In other news the Russian Ministry said that 8.3 MMT of grain has been harvested so far, with yields averaging 2.6 MT/ha so far, around 38% down on the same time last year. The majority of the harvest so far has been wheat at 7.4 MMT, they add.

Elsewhere on the Black Sea, UkrAgroConsult say that Ukraine will harvest it's smallest barley crop since it became independent in 1991 at 6.5 MMT, 20% down on last year and 1 MMT lower than the USDA currently predict.

In Europe, the debt crisis has almost been forgotten about even though Spain and Italy's borrowing costs continue to rise, with yields on Spanish 10-year bonds breaking through the generally considered unsustainable 7% mark today. Yields on similar Italian bonds rose to 6.1%.

Tonight the USDA is expected to reduce the percentage of the US corn crop rated good/excellent from 48% last week to around 42% as of Sunday night. Soybeans in the top two categories are expected to fall from 45% to 40%.

US satellite imagery firm Lanworth say that the US corn planted area is in fact around a million acres less than the USDA currently predict, and that the soybean area is some half a million lower.

The USDA issue perhaps one of the most eagerly-awaited WASDE reports in years on Wednesday. How are they going to attempt to balance the books this time? Can they without losing face? Will they even bother? I can't personally recall heading into such a report when the trade's forecast on corn yields has been so far removed the USDA's previous estimate.