EU GrainsTuesday Morning

07/08/12 -- EU grains are modestly higher mid-morning Tuesday with Nov 12 London wheat up GBP1.00/tonne to GBP192.50/tonne and Nov 12 Paris wheat EUR1.00/tonne firmer to EUR259.50/tonne.

A firmer overnight tone to US grain markets adds support, with US corn crop conditions declining to the extent that half the crop there is now rated as being in poor or very poor condition.

Further supporting European grains are further reductions in anticipated Black Sea output. Yesterday we have SovEcon cutting their outlook on Russian wheat production to 40.3-43.0 MMT from 46.5 MMT previously and 56.2 MMT last year.

Today we have news that Ukraine is experiencing record temperatures,which are expected to continue for the rest of the week with up to 40°C expected in some places. "These are the highest recorded temperatures for the last 112 years and this will probably affect the production of corn and soybeans," say Agritel.

What will tomorrow bring? The Russian government are due to meet to discuss the grain markets and their dwindling production prospects, with wheat output now seen in the region of the 2010 crop of 41.5 MMT that prompted the last export ban.

Despite having publicly said that an embargo is not on the cards this year surely some sort of action will be required with a near record 2 MMT of grains already having been exported in July, and 2.5 MMT forecast to be shipped out in August.