EU Grains Lower On Bumper Production Forecasts, Improved Crop Conditions

23/05/14 -- EU grains markets finished mostly lower on the day, and lower for the week, heading into the 3-day weekend. For both London and Paris wheat this was the fifth weekly loss in a row.

The day ended with May 14 London wheat going off the board unchanged at GBP150.50/tonne, with new front month Jul 14 down GBP0.25/tonne at GBP150.25/tonne and with new crop Nov 14 London wheat GBP0.75/tonne easier at GBP146.10/tonne. Nov 14 Paris wheat ended EUR2.00/tonne lower at EUR195.25/tonne, Jun 14 Paris corn slipped EUR0.25/tonne to EUR175.75/tonne, whilst Aug 14 Paris rapeseed fell EUR3.25/tonne to EUR358.50/tonne.

For the week, May 14 London wheat dropped GBP1.20/tonne and Nov 14 slid GBP2.90/tonne, Nov 14 Paris wheat declined EUR4.00/tonne, Jun 14 Paris corn fell EUR1.75/tonne and Aug 14 Paris rapeseed was down half a euro.

Rain on the US Plains, promising harvest prospects in Europe, upbeat production forecasts for Russia and Ukraine, and an easing of tensions between the latter two have all conspired against wheat in the past few weeks. London wheat has now fallen by around GBP20/tonne on old crop and GBP14/tonne on new crop from the late April highs, and we are now essentially back to where we were at the end of January before Russia decide to help itself to Crimea. Paris wheat still stands around EUR5/tonne off those lows, which perhaps owes a little to the recent strength in the pound.

Brussels confirmed that it had issued more corn import licences than those for wheat export for the third week running last night. Corn import licences were granted for 343 TMT, taking the marketing year to date total to 13 MMT versus 10 MMT a year ago at this time. Wheat export licences were issued for 249 TMT, taking the 2013/14 total so far to a record 25.9 MMT, compared to only 17.6 MMT this time last season.

Crop maturity across Europe continues to run ahead of schedule. FranceAgriMer said that 76% of the French winter wheat crop is heading, up from 44% a week ago and compared to only 17% this time last year. They did even bother reporting on the French winter barley crop, that was already 100% headed last week versus only 38% a year ago.

They said that 98% of the French corn crop is now sown, compared to 85% this time last year, with 89% of the crop lifting versus 68% this week in 2013.

They increased the proportion of the French winter wheat crop rated good/very good by 2 points from a week ago to 75%, versus 67% a year ago. French winter barley good/very good also rose 2 points to 72%, versus 66% in 2013. They said that 90% of the 2014 corn crop is in good/very good condition compared to 67% this time last year.

The EU Commission this week estimated the 2014 French soft wheat crop up 1.6% on last year to 37.4 MMT, with barley output up 6.8% to 11.0 MMT and the corn crop 13.9% higher at 17.2 MMT.

The Russian Ministry say that 66.1% of the 2014 spring wheat crop is now sown, along with 83.8% of the spring barley crop and 92.5% of the intended corn acreage. All those figures are ahead of a year ago. The head of Russia's Grain Union flagged up the current hot and dry conditions as being a possible threat to crop production this year.

He did note though that the problem could be quickly rectified if rain comes. The latest weather forecasts show above average rains for most of the country's grain belt across the next 15 days. It's not until the 8-15 day time frame that temperatures start to moderate though, and even then eastern regions stay warmer to much warmer than normal.

The Russian Ag Minister forecast the 2014 grain harvest there at 100 MMT, the highest since 2008. APK Inform said yesterday that they see Ukraine's 2014/15 grain exports holding up close to the record large estimates for this season, due to higher carry-in stocks and another strong production year.

Tunisia bought 50,000 MT of optional origin soft wheat for June-July shipment. Malaysia and Pakistan are said to be shopping for Black Sea origin wheat. Indonesia is said to have bought 125,000 MT of Russian wheat this month. Russian wheat scored as being the cheapest in an Iraqi new crop tender earlier in the week.

Another year of robust grain production, should we get it, and the aggressive marketing that traditionally accompanies it from the FSU, combined with an EU wheat crop at a six year high (and the second largest ever) and corn production here at 69.2 MMT (as forecast by the EU Commission on Wednesday, and the highest since at least the 1990's) is not a bullish scenario as far as price prospects are concerned.