EU Grains Mixed, A Few Weather Worries Emerging

06/06/14 -- EU grains closed mixed, with old crop Jul 14 London wheat ending at the lowest close for a front month since late 2011. New crop positions managed modest gains however.

The day ended with Jul 14 London wheat down GBP1.70/tonne at GBP145.00/tonne, and with new crop Nov 14 GBP0.55/tonne firmer at GBP143.10/tonne. Nov 14 Paris wheat rose EUR2.00/tonne to EUR193.00/tonne, Aug 14 Paris corn was EUR0.75/tonne higher at EUR178.50/tonne and Aug 14 Paris rapeseed finished EUR1.50/tonne easier at EUR344.25/tonne - a new lowest finish for a front month since July 2010.

For the week, Jul 14 London wheat was GBP2.00/tonne lower, with Nov 14 down a more modest GBP0.65/tonne. Paris wheat managed a EUR1.50/tonne gain, with corn up EUR5.00/tonne and rapeseed down EUR6.25/tonne.

Despite official optimism over harvest prospects in Russia, there are still private rumblings of discontent over dryness - as highlighted by MDA CropCast yesterday wiping more than 6 MMT off their 2014 Russian wheat production estimate.

Whilst lack of rain is the problem in parts of Russia, the jungle drums are suggesting that too much of it in Ukraine and Romania may be harming wheat quality there, with some suggesting that as much as half of the Ukraine wheat crop may only be of feed grade. So whilst quantity might not be a problem, quality certainly could be.

The prospect of the usual "cheap and cheerful" sellers having an abundance of feed wheat as well as corn to shift this year is perhaps a mixed blessing for western European growers.

The Ukraine Ministry said that 96% of the intended spring grain area has now been sown (7.73 million hectares). Corn planting is complete on almost 4.8 million hectares (97% of plan). Kazakhstan meanwhile is 98% planted on 14.65 million hectares.

Talking of mixed blessings, the heavy rains that US farmers on the southern Plains have been wishing for have finally arrived, but too late to be of any use to this year's crop. Indeed, they could even prove to be detrimental to it, delaying the harvest at the very lest, but also possibly causing some yield and quality downgrades.

"A large thunderstorm complex developed overnight setting off strong showers, the beginning of a stormy, wet period that may bring 4- 6 inches of rain to Oklahoma state. Wheat is already ripe and ready for harvest. However, soaking rains would replenish field moisture for the 2015 wheat crop, due to be planted in October," said Martell Crop Projections. Neighbouring Kansas is in for a similar drenching.

Switching back to western Europe, crop development continues to be well advanced, and production prospects remain very good. A spate of recent forecasts putting the EU-28 2014 rapeseed crop at a record near 22 MMT is weighing on that market. Informa meanwhile yesterday estimated the EU-28 2014 wheat crop at 144.5 MMT versus a previous estimate of 143.0 MMT. This puts them in line with other forecasts which are now centred around the 145 MMT mark, which would be the second largest EU wheat crop ever.

FranceAgriMer today said that the entire French wheat crop is now at the heading stage, compared to less than half of it this time last year. Spring barley is 62% headed against only 5% a year ago. Corn is fully planted versus only 88% done this time last year, and 53% of the crop has at least 6-8 leaves visible against only 14% this time last year.

French winter wheat rated good/very good fell one point from last week to 74%, although that still compares favourably with 67% this time last year. Winter barley rated good/very good was unchanged on a week ago at 71% versus 66% twelve months ago. Corn rated good/very good was also unchanged on last week at 88%, which is far better than only 59% this time last year.

Impending harvest pressure remains, but at these levels it might not take too much to spark a short-covering rally. Russia remains perhaps the most likely catalyst that could trigger such a move.