EU Grains Jump On Renewed Eastern Ukraine Hostilities

14/04/14 -- EU grains finished mostly higher as tensions in Ukraine escalated to new heights over the weekend. The arrival of a 7 am (London time) deadline for pro-Russian activists to vacate official premises seized in the east of the country over the weekend, or face military eviction, came and went. Moscow denied that Russian agents were provoking civil unrest in the area, and repeated the same lines about "protecting the lives of it's citizens" that were used to justify the annexation of Crimea.

May 14 London wheat closed GBP2.25/tonne firmer at GBP169.25/tonne, and with new crop Nov 14 London wheat up GBP3.50/tonne at GBP158.55/tonne. May 14 Paris wheat closed EUR4.25/tonne higher at EUR214.00/tonne, Jun 14 Paris corn was up EUR2.00/tonne at EUR189.00/tonne and May 14 Paris rapeseed fell EUR0/50/tonne to EUR416.50/tonne.

The news out of Ukraine overshadowed everything else, not that there was that much of anything else fresh today, and US wheat futures shot higher in early trade with EU grains following suit and staying there.

This is again all about speculation, whilst for now at least exports out of Ukraine continue more or less unhindered. It is also interesting to see wheat as the main beneficiary (just as it was when the invasion of Crimea began), when corn is possibly more at risk from production losses due to reduced plantings/input cut-backs than wheat.

APK Inform reported that Ukraine's seaports had shipped out almost 550 TMT of grains last week, although down on 619 TMT the week before, that's still a respectable volume. That total included 462.6 TMT of corn and 84.3 TMT of wheat.

Year to date Ukraine exports are now at 28.338 MMT, versus just over 20 MMT this time a year ago. That includes almost 18 MMT of corn and nearly 8 MMT of wheat.

Full season Ukraine exports are currently expected to be around 33 MMT.

Russia's grain exports meanwhile totalled 641 TMT in the Apr 1-9 period, most of which (549 TMT) was wheat. Year to date exports are now just under 21.5 MMT, a 47.5% increase on last season, including nearly 16 MMT of wheat, over 3 MMT of corn and over 2 MMT of barley.

SovEcon today estimated Russia’s grain exports this season at 25.0 MMT versus a previous estimate of 24.2 MMT

Closer to home, the EU Commission's MARS unit forecast 2014 EU soft wheat yields at 5.58 MT/ha, down 1.6% on last year, but 2.7% above the 5-year average. Barley yields were estimated at 4.49 MT/ha, down 4.9% on last year, but up 2.7% on the 5-year average. OSR yields were seen at 3.05 MT/ha, up 1.3% versus 2013 and 2.7% above the 5-year average.

On a UK specific level they forecast wheat yields here at 7.74 MT/ha, up 4.9% versus 2013. Barley yields were estimated at 5.69 MT/ha, down 2.7%, and rapeseed yields at 3.41 MT/ha, up 18.3%.

"In eastern France and England, the crops’ demand for water is still being met by soil water reserves, which were replenished at the beginning of the winter season. However, top-soils are drying out, and the spring crops sowing/ emergence will be negatively impacted if the precipitation deficit continues," they said.

In Germany, "March was one of the warmest and driest in our historical time series. Crop development is advanced with good leaf area expansion, but rain is now needed to sustain crop growth in the coming weeks," they added.

In Ukraine, "the exceptionally dry conditions in central Ukraine may affect yields of winter cereals. Winter wheat yields forecasts are below the 5-year average," they noted.