EU Wheat Grinds Lower, Rapeseed Takes Another Thrashing

19/07/13 -- EU grains were mixed in a relatively subdued session. The market appears to be waiting for the European wheat harvest to get into full swing before a better assessment of quality and yields can be made. Meanwhile though wheat is grinding slowly lower. There's nothing slow about the demise of rapeseed however, that market has fallen more than EUR100/tonne in less than 3 months.

London wheat closed with front month Nov 13 GBP0.60/tonne lower at GBP167.50/tonne and Nov 13 Paris wheat unchanged at EUR194.25/tonne. For the week that places London wheat GBP2.25/tonne easier, whilst Paris wheat shed EUR3.50/tonne. Paris rapeseed was on the end of another thrashing, closing EUR4.50/tonne lower on the day at EUR379.50/tonne on front month Aug 13 (the lowest close for a front month since October 2010), for a EUR12.00/tonne loss on the week.

The problem with rapeseed, is not just that EU and world production seen higher in 2013 (after all it is also for wheat), it's where is the demand coming from now that Europe is planning to if not kill, at least partially maim, the two-headed biodiesel monster that it helped create. Processing plants are already closing, announcing plans to switch to other feedstocks, or running at sharply reduced capacity after the EU Parliament's environment committee recently voted in favour of limiting the share of food-based biofuel used in cars and trucks to 5.5% of total consumption from the 10% initially mandated.

German trading house Toepfer estimated the wheat crop there at 24.24 MMT today, up 8.6% on last year. They also forecast German rapeseed production sharply higher at 6.04 MMT, an increase of more than 25% on output in 2012 - easily making them Europe's largest producer in 2013/14. Optimism is high that almost ideal ripening conditions in recent weeks will also mean that quality is good this year, they added.

Toepfer estimated the EU-28 soft wheat crop at 134.2 MMT, up 7% on last year, and higher even than Strategie Grains' estimate of 133.4 MMT from yesterday. Wheat production in Romania, who won a share of this week's Egyptian tender, will leap almost 24% to 7.12 MMT this year they forecast. They see the UK wheat crop at 11.60 MMT and the rapeseed crop here at 1.95 MMT this year.

FranceAgriMer said that this year's French soft wheat harvest is 3% done nationally, most notably in the Midi-Pyrenees (35%) and Aquitaine (26%) regions. Winter barley is 48% harvested, up sharply from only 5% a week ago, and even a little bit of spring barley has already been cut in the Centre region where harvesting is 7% complete.

French corn showing 6/8 leaves visible is up from 88% last week to 92%, although only 1% of the crop is at the silking stage versus 25% this time last year.

French wheat rated good/excellent fell two percentage points from last week to 67% (and versus 71% a year ago). Winter barley good/excellent was unchanged from last week at 66%, spring barley was down one point in the top two categories to 70%. Corn good/excellent was up one point to 57%.

Ukraine's early grains harvest (excluding corn) currently stands at 21.2 MMT off 70% of the planned area with average yields up 29% on year ago levels at 2.83 MT/ha. This total includes 15.64 MMT of winter wheat, a small amount of spring wheat, 2.85 MMT of winter barley and 2.16 MMT of spring barley.

Russia's grain harvest now stands at 27 MMT, with average yields up 24% on last year at 3.05 MT/ha, including 21.9 MMT of wheat and 2.2 MMT of barley. Yields on the latter are said to now only be 6.5% up on last year's very poor performance at 2.95 MT/ha and falling (a week ago the average was 3.86 MT/ha).

China, who have been sniffing for Australian wheat all week, are now said to have bought ten cargoes equalling 600 TMT for Jan/Mar shipment. They also bought 120 TMT of US SRW wheat today to add to their recent wheat buying spree.