EU Grains Mixed, But Downwards Trend Still Seems Intact

20/08/13 -- EU grains closed mixed after trading mostly lower for much of the day as US markets fell in "Turnaround Tuesday" style after posting solid gains last night. We remain heavily under the influence of a US weather market, although crops in many places are getting bigger and the overall trend is probably still downwards.

At the close Nov 13 London wheat was GBP0.45/tonne firmer at GBP154.00/tonne and with Jan 14 also up GBP0.45/tonne at GBP156.25/tonne. Nov 13 Paris wheat finished the day unchanged at EUR184.50/tonne.

APK Inform increased their forecast for Ukraine grain production from 54.1 MMT to a record 57.1 MMT, including an increase for wheat production to 21.4 MMT from the 20.5 MMT previously estimated and up 36% on output of 15.76 MMT last year. They also increased their corn crop forecast from 23.9 MMT to 26.2 MMT (also a record and up 25% on last year), with barley output rising from 7.15 MMT to 7.3 MMT (vs. 6.94 MMT in 2012).

Sources in Ukraine say that domestic grain prices at ex farm level are very poor. A lack of on farm storage means that many growers simply sell their grain for whatever they can get at harvest time in order to fund seed and fertiliser purchases for the winter planting campaign.

In the case of 3rd grade wheat and OSR they are the lowest for this time of year versus the last 4 seasons, with wheat at around USD148/tonne (equivalent of GBP94.50/tonne) versus USD210/tonne a year ago. Ukraine cash OSR prices are at around USD382/tonne (circa GBP243.50/tonne) versus USD541/tonne this time last year.

New crop corn in Ukraine is expected to fetch little more than EUR100/tonne at farm level this autumn, which is below the cost of production.

Ukraine exported 216 TMT of OSR in July, a record for that particular month, and full season exports will rise to around 2 MMT, up 45% on last year, according to local analysts ProAgro.

Kazakhstan has harvested 1.37 MMT of grain so far, with early yields averaging 1.58 MT/ha, up 72% on this time a year ago.

Russia's harvest meanwhile has advanced to 52.4 MMT off 44% of the planned area. Wheat accounts for 35.8 MMT of that off 48% of the predicted area, with average yields said to be up 41% at 2.96 MT/ha. They've also harvested 9.5 MMT of barley and 1.4 MMT of early corn.

Agritel report that the feed/milling wheat spread in Russia has doubled since the start of the 2013/14 crop year, suggesting that much of this year's crop is of lower grade than normal. That is probably due to wet weather in the run-up to harvest and may also help explain their failure to feature in any of Egypt's recent tenders?

Nevertheless, Rusagrotrans said that Russia will export 16.3-16.5 MMT of wheat in 2013/14, up around 47-49% on last year. Could much of that be low grade milling/feed wheat?

Agritel last night increased their 2013 French soft wheat production estimate to 37.0 MMT versus a French Ministry forecast of 36.1 MMT. That's up 4% on last year and the highest since 2004. The quality of their crop is generally now thought to be pretty good after a few early jitters.

Stats Canada are out with their latest production forecasts tomorrow. A Reuters survey puts all wheat production there at 30.4 MMT, up 12% versus 2012 and their largest crop in 22 years. Rapeseed production meanwhile is seen at a record high 15.5 MMT, up 16.5% on year ago levels.