Nogger's Blog

15/07/13 -- EU grains were lower on harvest pressure and weaker US markets. Benchmark Nov 13 London wheat closed GBP1.80/tonne weaker at GBP167.95/tonne, with Jan 14 also down GBP1.80/tonne to GBP169.15/tonne and Nov 13 Paris wheat settling EUR3.75/tonne easier at EUR194.00/tonne.

The hot and dry spell has brought EU crops forward, allowed them to dry out and further reduced disease pressure. Hence, the wheat harvest is reported to be underway in France, due to begin any day now in Germany, and the first of the UK's winter barley has apparently also been cut across the weekend.

It's too early to say how the UK barley harvest will turn out, but optimism is certainly a lot higher than it was a three or four months ago, and many crops are now looking very promising. The USDA are predicting a crop of 6.75 MMT here, up 22% versus 2012, boosted by a sharp increase in spring plantings. EU-wide they estimate production at 56 MMT, and for once they may be on the low side. The EU Commission forecast EU-28 barley output at 58.3 MMT (including around 200 TMT from new kid on the bloc Croatia), an increase of around 7% on last year.

Harvesting in Ukraine is ongoing, and is now around the 15 MMT mark, including more than 10 MMT of wheat and almost 5 MMT of barley. Average yields are said to be up from 2.0 MT/ha to 2.7 MT/ha, an increase of 35%. Grain exports for the 1-12 July period stand at just under 300 TMT, including 160 TMT of corn, 84 TMT of barley and 52 TMT of wheat. They are said to be currently loading a 90 TMT vessel, the Nord Pisces - one of the largest bulk carriers around, with feed barley destined for Saudi Arabia.

The Ministry are forecasting total Ukraine grain exports at 26.0 MMT this year, a rise of 14% on last year. That in itself would be a record volume, although some estimates are in the 27-29 MMT region versus the previous record of 25 MMT in 2008/09. The Ukraine National Bank say that foreign currency reserves are currently at a 6-year low, which will also serve to encourage exports.

Russia finished 2012/13 exporting 15.72 MMT of grains, say the Ag Ministry. That's a drop of 42% on the 27.2 MMT exported in the previous marketing year, before last season's drought struck. The Ministry say that if this season's wheat crop tops 50 MMT (the current official forecast is 54 MMT) then they will export 20 MMT of grains in 2013/14. That would be a rise of 27% on last year, although still well below the levels of two years ago.

The Russian grain harvest currently stands at 21.4 MMT, including 17.9 MMT of wheat and 2.0 MMT of barley. Wheat yields are so far said to be averaging 3.26 MT/ha, up 28% on year ago levels, but these results are from the better areas in the south. Prospects look a bit bleaker further north and east, especially amongst the spring sown crops.

There's unconfirmed talk of Russia possibly agreeing to supply Egypt with wheat on humanitarian grounds, or at least wanting to instigate a coordinated international move to do so, without any specific details being available.

Paris rapeseed futures fell sharply for a third session in a row, also on harvest pressure and the outlook for a jump in production to a 3-year high of 20.4 MMT, as forecast by Oil World last week. That's a 5% improvement on output last year, and comes at a time when EU demand is seen slowing as plants close or run well below capacity on the outlook for a reduction in biofuel production due to probable legislative changes to the biofuel mandate.

In addition, Ukraine, the EU's leading foreign supplier of rapeseed, is seen having a jump of around 50% in output this year to 2 MMT. Around 70% of their crop would normally be heading for Europe.

Aug 13 Paris rapeseed closed the day at EUR7.50/tonne, down EUR385.00/tonne and the lowest level for a front month since October 2010.