EU Grains Post Modest Gains Following US Lead

16/10/12 -- EU grains were mixed with Nov 12 London wheat down GBP0.75/tonne to GBP198.25/tonne and with Nov 12 Paris wheat falling EUR1.50/tonne to EUR257.50/tonne.

US grains attempted to stage a mini "Turnaround Tuesday" in early trade and European markets followed suit. However, by the close of play America had slipped back into slightly negative territory, at least for corn and wheat, taking the shine off things in Europe too.

The EU trade seems to be in a state of limbo. London wheat hasn't closed outside the GBP197-207/tonne range in two months, whilst Paris wheat has been stuck in the EUR256-268/tonne range for the same period.

The general consensus seems to be that the Black Sea is more or less out of the market now, at least for wheat, and that EU exports will soon start to pick up. Lower EU-27 production this year will see ending stocks tightening as we get into the second half of the season.

Argentina's wheat crop will be wanted by Brazil. Australia's wheat crop will fall short of the 23 MMT that the USDA cut to last week, and will be closer to the 20 MMT mark. Those left holding wheat in Q3 and Q4 of 2012/13 will be strong sellers and buyers will simply have to pay up. That is the gist of the common theory doing the rounds at least.

Concerns are also being raised that the current wet conditions, not just in the UK but also in northern France, are hampering winter grain sowings.

Eurozone jitters and fund selling in the US have been hampering any attempts at gains though.

When is a bailout not a bailout? Spain are said to be close to asking the ECB for a "credit line" so that it can begin buying Spanish debt. The move, which some think they may seek approval for at this week's Euro-zone Summit beginning Thursday, appears to be a way of avoiding the same degree of humiliating compliance dished out to Greece.

The market being the market, in it's typical short-sighted way, seems to think that extending Spain some more rope with which to hang itself is a good thing. Live for today, hope for tomorrow. The Euro was higher across the board on the rumour.

Following this year's disastrous harvest, various private forecasts see the UK importing anywhere between 1.5-2.5 MMT of wheat in 2012/13, an increase of 66-177% on last season. Exports meanwhile are expected to more than halve to 1 MMT at best.

Ukraine reported Oct 1 grain stocks at 19.4 MMT, 11% down on year ago levels. That included 10.5 MMT of wheat, 2.9 MMT of barley and 4.3 MMT of corn. The corn harvest there is around two thirds complete, delayed by recent rains, although these will be beneficial for winter grain development pre-dormancy.

An Ag Ministry official said that 90% of winter grains are in healthy condition, and that 9.1 million hectares will be sown with winter crops this year, a slight drop on 9.4 million last year, although the winter wheat area will be increased by around 100,000 ha.

Ukraine's grain exports are 73% up on this time a year ago at 6.64 MMT, although it is worth noting that export restrictions in Q1 of 2011/12 hampered the early part of that particular campaign. Of that total 3.35 MMT is wheat, 1.85 MMT corn and 1.34 MMT barley.

The Ministry said that 11 MMT of grains have already been contracted for export this season, including over 5 MMT of wheat, which is supposed to be the ceiling that has already been agreed with local trading houses. The bulk of export sales for the remainder of 2012/13 will therefore likely be corn. Japan bought 250 TMT of Ukraine corn overnight.

Romania's corn crop is forecast 42% lower this year to 6.1 MMT by the USDA's Bucharest attaché on persistent summer dryness.

The early Canadian harvest this year may see increased winter wheat plantings for the 2013 harvest, possibly to record levels, according to some reports. These would usually be completed by the end of October.