EU Wheat Lower On US Rains

06/08/12 -- EU grains closed mostly lower with Nov12 London wheat down GBP0.50/tonne to GBP191.50/tonne and Nov12 Paris wheat EUR2.50/tonne easier at EUR258.50/tonne.

Better and more widespread weekend rains in  the Midwest weighed on the grains sector, although further concerns over Russian grain production underpinned losses.

"Waves of strong thunderstorms on the weekend produced more than one inch of rainfall on 65% of corn and soybean farms. It was the best weekly rainfall since late May in the grain belt. The GFS model forecast on Friday under-estimated the rainfall both in quantity and coverage," said Martell Crop Projections.

"August rainfall would be more beneficial for soybeans than corn. The soy crop is in the midst of setting pods. The bean filling stage follows pod setting period and takes 30-35 days to complete. Plants are stunted from severe drought, certain to make a low yield, but with generous rainfall for bean-filling conditions would improve somewhat. Midwest corn is mostly beyond repair though rains may boost late grain filling," they added.

One contact in the US emailed me to say: "Corn harvest started last week at Arthur, Illinois, a month and a half earlier than normal. The yields were said to be 100 bu per acre at 24% moisture, which is half of the yield those guys in the good black dirt area of Illinois expect to get, but still much better than most thought possible."

Elsewhere, SovEcon cut their forecast for Russian grain production this year to 72-75 MMT, some 20-23% down on last year, and well below their previous estimate of 78.5-81.5 MMT. Wheat production this year is now only forecast at 40.3-43.0 MMT, down from a previous estimate of 46.5 MMT and around the same level that prompted the Russian export ban in 2010 (41.5 MMT).

The Russian government meet on Wednesday to discuss the situation, although they have recently stated that they will not be introducing an export ban again this year.

Closer to home, FranceAgriMer report that 80% of France's spring barley crop is in good or excellent condition compared to only 25% this time last year. Higher levels of damage to winter wheat and barley than normal see French spring barley plantings at a more than 20 year high.

The combination of this significant increase in acreage, and excellent crop conditions, mean that "the country could have more than twice as much malting barley for export as normal, boding ill for prices," report