Nogger's Blog

22/05/14 -- EU grains closed mostly lower, as yet another feeble attempt to rally proved to be relatively short-lived.

Expiring tomorrow May 14 London wheat ended down GBP0.50/tonne at GBP150.50/tonne, and new crop Nov 14 London wheat closed GBP1.05/tonne lower at GBP146.85/tonne. Nov 14 Paris wheat closed EUR1.50/tonne easier at EUR197.25/tonne, Jun 14 Paris corn was up EUR0.50/tonne to EUR176.00/tonne (although other months were lower) and Aug 14 Paris rapeseed rose EUR3.50/tonne to EUR361.75/tonne.

The European Commission forecast increased EU wheat and corn production this year, but with barley output understandably lower after last year's boost from heavy spring plantings. Exports of all three grains will decline in 2014/15, and ending stocks of all three will rise, they said.

They estimated EU-28 soft wheat production in 2014 at 135.9 MMT, up 1.2% on last year. That includes 37.4 MMT from France (versus 36.8 MMT in 2013), 25 MMT from Germany (unchanged) and 14.7 MMT from the UK (up sharply from 11.9 MMT, with the potential to ultimately finish above 15 MMT). They see soft wheat exports in 2014/15 falling to 22 MMT from 27 MMT this season, meaning that ending stocks will rise to 11.9 MMT from 9.5 MMT.

As far as barley output goes, they expect a 2014 EU-28 harvest of 55.7 MMT, down 6.4% on last year's 59.5 MMT. Exports will decrease to 7.0 MMT from 7.5 MMT, and ending stocks will rise to 8.2 MMT from 7.3 MMT, they said.

For corn, they predict an EU-28 crop of 69.2 MMT, up 6.6% versus last year. Despite the higher production, exports will drop to 2.1 MMT from 2.8 MMT, and 2014/15 carryout will increase to 14.9 MMT from 13.7 MMT, they added.

A Reuters survey estimated the EU-28 soft wheat crop even higher, at 137.5 MMT - a six year high and the second largest on record. The range of estimates was quite wide at 135.6-141.5 MMT versus 134.3 MMT last year.Some clearly think that yield potential this year is very good, if not exceptional. All wheat production was pegged at an average of 145 MMT, against 142.2 MMT in 2013. Agritel forecast an EU-28 soft wheat crop of 137.9 MMT.

The Russian Ag Ministry raised their forecast for the grain crop there this year to 100 MMT, an 8.2% increase on a year ago. Current weather condition there are hot and dry, but this is expected to moderate to normal temperatures and above normal rainfall a week from now.

They said that spring grain plantings are done on 8.1 million ha of wheat (61.2% of plan), 7.3 million ha of barley (83.4%) and 2.4 million ha of corn (91.6%).

Ukraine is mostly warm and wet, providing near ideal "hothouse" growing conditions.

APK Inform said that Ukraine's grain exports so far this season total 30.88 MMT, including 19.4 MMT of corn, 8.9 MMT of wheat and 2.3 MMT of corn. There's a further 314 TMT of grain loaded on vessels waiting to leave, they added.

They forecast 2014/15 grain exports little changed, down 2% from this season's record. Carry-in of 11.5 MMT (up 19% versus a year ago) from last year's bumper grain harvest will help, they said.

Ukraine will therefore export 30.5 MMT of grains in 2014/15, including 19.5 MMT of corn, 8.5 MMT of wheat and 2.3 MMT of barley, they predict. These are very similar totals to this season and this large volume of corn exports is likely to depress wheat usage in the EU for another year it would seem.

The HGCA said that "If the weather during yield forming permits, the UK should be expected to return as a net wheat exporter after an absence of two seasons. As a result of this, GB prices are likely to need to become competitive with other European exporters." Currently they are not.

Defra estimated UK wheat exports this season at only 450 TMT, an at least 23 year low, and down by almost 40% on even last year's poor showing. UK corn imports meanwhile will reach a record 2.18 MMT, almost 5 times the volume of wheat exports, they added.