Nogger's Blog

27/05/13 - With both the UK and US markets closed for public holidays this was never going to be a thriller, and so it proved. At the end of a thin trading session Paris wheat closed with front month Nov 13 EUR0.75/tonne lower at EUR204.00/tonne. Corn and rapeseed futures were also mostly modestly lower.

Fresh news was understandably thin on the ground. The Ukraine Ministry said that the country had exported 21.6 MMT of grains so far this marketing year, up 11% on a year ago. May exports to date are around 700 TMT, of which a little under 100 TMT is wheat, with almost all the remainder being corn.

That leaves them with a very busy five weeks ahead if they want to hit the Ministry's target of 24.5 MMT of grain exports for the season. A more realistic target is probably now 23 MMT, leaving an extra 1.5 MMT to be carried over into 2013/14.

Production prospects for that are becoming clearer, with the Ukraine National Weather Centre today forecasting a winter grain crop of 22.5 MMT, of which 19.3 MMT will be winter wheat and 2.47 MMT winter barley. A winter grain crop of 22.5 MMT would be almost a third up on production of 17.1 MMT last year.

Ukraine are clearly going to be their usual aggressive early season marketeers. New crop Ukraine milling wheat is currently offered in the market at around USD257/tonne FOB the Black Sea, the equivalent of around GBP170/tonne. Romanian milling wheat is even cheaper at around USD250/tonne FOB Constanta (circa GBP165/tonne).

These are the sort of offers that will undermine European prices at harvest, and almost certainly through until at least the end of the calendar year, despite what production prospects here look like. Not that things in Europe look too bad in general, at least not for wheat and barley at any rate.

The vibes coming out of France as far as rapeseed production potential is concerned aren't good though, with parallels to the UK being drawn. French rapeseed was sown under dry conditions last autumn, had a very wet winter and a cool and damp spring. A survey of analysts and traders last week pegged the French rapeseed crop at 4.5-4.8 MMT, versus 5.5 MMT in 2012.

A survey by Agritel published today pegs the French rapeseed crop at a 7-year low of 4.4 MMT. If true that's a drop of almost 24% on last year, although they did point out that farmers whose crops had been worst affected by the weather may have been the most likely to respond to the survey, so to treat the number with a degree of caution.

Separately Bloomberg reported on Friday that French oilseed institute Cetiom said that an estimated 42% of winter rapeseed in Lorraine had been ploughed up. Lorraine is normally responsible for around 9-10% of the French national crop.

Cetiom estimate the French rapeseed area at 1.47 million hectares. Yields in 2012 were 3.38 MT/ha, the same as in the UK, so a drop down to 3.0 MT/ha this year doesn't seem too outlandish and that would indeed only produce a crop of 4.4 MMT.

Wetter and cooler than normal is the forecast for most of Europe for the next 7 days. After that the GFS model is giving warmer than normal for everywhere east of France, whilst the CMC model maintains a cooler outlook for the entire continent through the next 14 days.

Further east, Russia, Ukraine and Kazakhstan are all seen warmer than normal for the next two weeks. The GFS model also has things wetter than normal too for most of the region, with the exception of Kazakhstan which remains dry. The CMC model gives wetter than normal for central and southern Russia, all of Ukraine and western Kazakhstan for the next 14 days.

Tomorrow night's US planting progress report from the USDA will be the next market mover, with the trade expecting corn plantings at around 80-90% complete and soybeans around 35-40% sown.