EU Grains Lower On The Week As Large Harvest Looms, But Ukraine Situation Supports

02/05/14 -- EU grains finished the day mixed, with May 14 London wheat closing GBP0.50/tonne higher at GBP167.00/tonne, and with new crop Nov 14 London wheat up GBP0.95/tonne at GBP158.20/tonne. May 14 Paris wheat closed unchanged at EUR215.25/tonne, Jun 14 Paris corn was down EUR0.75/tonne at EUR183.75/tonne, whilst Aug 14 Paris rapeseed fell EUR4.00/tonne to EUR359.25/tonne.

For the week, May 14 London wheat fell GBP3.00/tonne, with new crop Nov 14 down GBP1.55/tonne. May 14 Paris wheat slipped EUR2.00/tonne versus last Friday, with Jun 14 corn losing EUR3.50/tonne and Aug 14 rapeseed dropping EUR9.00/tonne.

Egypt's GASC bought one cargo each of Ukraine and Russian origin wheat for Jun 1-10 shipment in it's tender. French and US wheat was outpriced to the tune of $15-16/tonne. Egypt's decision to buy from Ukraine is interesting, given the current political turmoil. It also proves that both Ukraine and Russia still have old crop wheat to sell deep into the 2013/14 campaign. Weakness in their respective local currencies will also assist them in their pricing.

Agritel said that no major areas of Ukraine are expected to go unplanted this spring, although reduced usage of certified seeds, fertiliser and agrochemicals can be expected, suggesting potentially lower yields

Elsewhere, Saudi Arabia are tendering for 550 TMT of wheat, the result of their tenders are often released over the weekend.

The European market appears to be relatively unmoved by the news that the US winter wheat crop is in trouble, perhaps coming to the conclusion that this is a US problem (or even more specifically a Kansas wheat problem), not a European one. The market may have a point.

Wheat, barley and oilseed rape crops across Europe are generally in very good condition, and harvesting is shaping up to come in large and early. After a mild winter crop maturity is well advanced, rapeseed is flowering early - and will likely flower for longer - boosting yields.

FranceAgriMer reported that 97% of the French winter wheat crop is at the 2 node stage, versus only 39% this time a year ago. They said that 6% of the crop is already heading, up from 1% a week ago and against zero this time last year.

French winter barley is 100% at the 2 node stage versus 60% a year ago, and 52% of the crop is heading compared to only 4% this time last year. They said that 21% of the spring barley crop is already displaying an ear of at least 1cm compared to just 4% a year ago.

French corn planting meanwhile is 78% done versus only 53% in 2013, and 39% of the crop is lifting against just 4% this time last year when conditions were very wet.

The French winter wheat crop was rated 73% good/very good, down a point from last week but up compared to 68% this time last year. Winter barley rated good/very good also fell a point on last week to 70%, but that's still 3 points ahead of this time in 2013.

At home, the HGCA said that 95% of the 2014 spring barley crop was planted by the end of April. They said that both winter wheat and barley was well advanced compared with recent seasons.

The pound meanwhile ended the week close to 1.69 against the dollar, it's best level in almost 5 years. Sterling is also not far off 1.22 versus the euro, it hasn't spent any sustained time above that level since 2012.

UK growers remain only relatively lightly sold on new crop wheat and OSR, despite the outlook for a return to "normal" production levels this year. Production levels that will require exports, a thing that won't be aided by the strength of the pound.

Almost all of the above suggests lower domestic prices in the second half of 2014. However, breaking news late Friday and early Saturday that more than 30 people had been killed in a fire that broke out in an Odessa government building, may encourage further speculative money to enter the fray next week.

Odessa is Ukraine's leading grain export hub, the gateway to Europe and North Africa. This is also the first such eruption of major violence in the South/West of the country, and a sign that the unrest in the country isn't any longer mostly confined to the east.