EU Grains Fall On Outside Influences, Egypt News

29/01/14 -- EU grains closed mostly lower on outside market jitters. The recent collapse of Argentine peso and Turkish lira, ahead of a Fed announcement later today that is expected to say that they are to further reign in stimulus for the US economy, sparked a bit of a flight to safety.

Mar 14 London wheat ended GBP2.60/tonne lower at GBP150.25/tonne, and new crop Nov 14 slipped GBP2.25/tonne to GBP142.25/tonne. Mar 14 Paris wheat stumbled EUR2.75/tonne to EUR190.00/tonne, Mar 14 Paris corn also slipped EUR1.50/tonne to EUR171.75/tonne, whilst Feb 14 Paris rapeseed managed a EUR0.25/tonne gain to EUR363.25/tonne.

The Turkish Central Bank raised overnight interest rates from 7.75 percent to 12 percent at an emergency late night meeting in an effort to try to reduce inflation and boost the lira, which had previously fallen to record lows. They also more than doubled the one-week deposit rate to 10 percent from 4.5 percent.

The Argentine peso meanwhile is in free fall, falling around 14% in just one day last week, after their Central Bank stopped supporting the currency as its foreign exchange reserves dwindle.

Widespread civil unrest in Ukraine and Thailand is also unsettling investors nerves, ones that are already fretting over a slow down in Chinese growth.

The end result of all that seems to be increased risk aversion.

French wheat was also under pressure in the aftermath of Egypt's decision to lower the maximum moisture level in this week's tender from 13.5% to 13.0%. Much of the wheat currently in store in Rouen is said to be in the 13.5-14.0% range.

The France Export Cereales lobby group said that they will appeal to Egypt to rethink their strategy, but for now French wheat seems to be effectively excluded from future GASC tenders.

The arrival of winter in Ukraine seems to be causing some disruption to grains movements and loading at the ports. Grain exports are currently up 34% on last year at almost 21 MMT at the moment, and are expected to reach 32.5 MMT for the full season versus only 23 MMT in 2012/13. The 2013 grain harvest was a record 63 MMT in bunker weight, up 36% on 2012's 46.2 MMT.

The Russian Ministry only managed to pick up 7 TMT of grains for it's intervention fund today in it's twice-weekly purchase. Volumes have been very light since they resumed buying for the fund after the Christmas and New Year break. They do however continue to find wheat to export, as confirmed again in yesterday's Egyptian tender. They've exported over 17 MMT of grains in 2013/14 so far (to Jan 19), a rise of 31.6% on last season.

There's some debate as to the possible impact of the arrival of colder weather in Europe for wheat that hasn't become fully hardened due to the thus far mild winter. Talk of possible winterkill issues for unprotected wheat in the US is also doing the rounds as temperatures dip to -20C in some areas.

The HGCA tweaked their 2013/14 UK supply and demand balance sheet, increasing wheat imports to 1.63 MMT, although that's still a decrease of 45% on last season. That could still be a little low as customs data shows wheat imports of 1.18 MMT by the end of November.

Human and Industrial UK wheat consumption was revised lower, to just under 7.5 MMT, due to reduced flour production and lower demand from the wildcard bioethanol industry. UK corn imports were increased to 1.726 MMT.