EU Grains MIxed, Bulls Best Hopes Lie With Russia (Again)

29/05/14 -- EU grains closed mixed, with the differential between old and new crop on London wheat narrowing to little more than GBP2.00/tonne.

The day ended with Jul 14 London wheat GBP0.75/tonne lower at GBP146.50/tonne, and with new crop Nov 14 GBP0.30/tonne higher at GBP144.35/tonne. Nov 14 Paris wheat closed EUR1.00/tonne lower at EUR191.50/tonne, Jun 14 Paris corn was up EUR0.50/tonne at EUR171.50/tonne and Aug 14 Paris rapeseed finished EUR0.50/tonne firmer at EUR350.50/tonne.

Pressure from the potentially large looming EU harvest remains, although there are just enough nerves around about Russia being hot and dry to take a little bit of pressure off, despite official reassurances that everything there is fine.

Oil World forecast the EU-28 rapeseed crop at an all-time high 21.9 MMT, up from a previous estimate of 21.4 MMT and versus 21.3 MMT last year.

The German crop will come in at 5.7 MMT, unchanged from last month and little different to 5.8 MMT last year. That's in line with Toepfer's estimate of 5.72 MMT from earlier in the week.

Oil World estimated the French OSR crop at 5.2 MMT versus 5.1 MMT previously and up 18% on last year's poor crop of 4.4 MMT. They see production in the UK at 2.5 MMT, up from 2.4 MMT last month and up almost 14% on last year's 2.2 MMT. The UK will continue to vie with Poland to claim to be Europe's third largest rapeseed producing nation. Output there is also forecast at 2.5 MMT, versus 2.4 MMT previously, but down on 2.8 MMT a year ago.

Brussels said that it had issued 530 TMT of soft wheat export licences this past week, taking the soon to end 2013/14 marketing year total to a record 26.4 MMT. Import licences for 254 TMT of corn were also granted, taking the seasonal total to 13.3 MMT.

Rusagrotrans said that Russia will export around 1.4 MMT of grains in May, dropping to 5-600 TMT in June as old crop stocks decline. That potentially puts Russia's 2013/14 season exports at 25 MMT.

The head of the Ukraine grain traders union forecast this year's harvest at 60-62 MMT, down only a little on last year's 63 MMT. If achieved hat would be far higher than was thought likely a few months ago. He also sees 2014/15 exports little changed from this year's 32 MMT at 30-32 MMT.

Origin Enterprises said that UK crops have excellent yield potential after "near-perfect growing conditions supported the accelerated development of winter and spring [crops]," according to Agrimoney.

The HGCA said yesterday that the will issue their May crop report which "will give insight into crop conditions as they head into the critical final development stages" in the next few days.

Algeria was said to have bought 700 TMT of new crop French wheat at prices significantly below current replacement levels yesterday, in trader anticipation of lower prices to come.

A possible upcoming drought and some serious crop damage in Russia is still the bulls' best hope, followed by El Nino related problems for Australian wheat later in the year. The former would probably be more likely to be a big market mover than the latter.

Will the bulls get what they want, will Russia come to the rescue again? The Russian Weather Centre said that June will begin hot and dry in the European part of the country. They, and other analysts, note though that the very wet autumn that they endured currently means that most areas still have enough moisture in the soil for crops to look "normal" compared to previous average years.

However, there's a 70% chance of higher than normal temperatures and no better than normal rains in the June-August period, they say.