EU Wheat Up, Rapeseed Down On Money Flows

12/03/14 -- EU grains finished mostly higher on the day, with the exception of rapeseed which fell sharply as US soybean/meal futures caved in. Wheat figured in two-sided trade, but the bulls won the day as fund/spec money continues to flood into the market sniffing the chance of an easy buck. Fund money meanwhile is diving out of a near record long in soybeans.

Mar 14 London wheat ended the day GBP2.25/tonne higher at GBP167.00/tonne, and with new crop Nov 14 GBP2.60/tonne firmer at GBP159.50/tonne. May 14 Paris milling wheat rose EUR3.25/tonne to EUR213.50/tonne, Jun 14 Paris corn was EUR2.50/tonne firmer at EUR185.75/tonne and May 14 Paris rapeseed fell EUR7.25/tonne to EUR403.00/tonne.

"Wheat futures continue to defy any sense of negativity from a technical and fundamental standpoint. The Agriculture Minister for Ukraine suggested that the major area for spring grains could remain unplanted due to fuel shortages," said one market observer. Yet, the area referred to - Crimea - accounted for an almost insignificant (1.2%) of Ukraine's total net grain output in 2013.

We are in (literally) blind panic mode here. London wheat has shot up over 7% since Russia helped itself to Crimea at the end of February, with Paris wheat up 6% and Paris corn up by almost 10% during the same period. Yet there is no evidence whatsoever at this stage that Ukraine's grain exports or spring plantings have slowed by any significant degree at all. The $6 million question is does this provide a Putin-given selling opportunity, or is this a major reversal of direction in the grain markets?

Ukrainian farmers have already planted 106,000 hectares of spring grains this year. Winter grains are rated 93% good to satisfactory. Russia has planted 65,800 ha of spring grains. The Agriculture of Ministry in Russia indicated that 96% of the winter grain crop planted there is in good to satisfactory condition for this year. Both are above the average ratings for this time of year.

The Russian Ag Ministry today revised their forecast for 2013/14 grain exports up from 20 MMT to 22 MMT, citing Ukraine "uncertainty" and the weak rouble.

FranceAgriMer cut their forecast for 2013/14 French soft wheat exports from 18.41 MMT to 18.19 MMT, and raised ending stocks from 2.85 MMT to 3.17 MMT.

The USDA's FAS pegged the Indian 2014/15 wheat crop at a record 96 MMT versus 93.1 MMT last year.

The HGCA said yesterday that UK winter grain crops are largely in good condition, given some notable exceptions in the badly flooded areas.

That all points to lower prices down the line, not firmer ones, but as has been proven many times before, the power of fund money should never be under-estimated. They can make things happen that shouldn't really happen.

A prudent course of action would probably be to have a fair proportion of your 2014/15 crop forward sold at this point if you are a producer. If you are a buyer, then again a fair degree of forward cover is perhaps advisable.

Consider that a Reuters poll earlier in the year gave a potential upside to CBOT wheat of $8.50/bushel at the turn of the year, more than 23% higher than last night's close on the Mar 15 future, which will be the front-month then. The downside was $4.75/bushel, 31% below last night's close.