Nogger's Blog

30/06/14 -- EU grains closed mostly lower heading into the USDA's June plantings and quarterly stocks reports. Whilst no major surprises are expected for wheat, these reports regularly throw up an unexpected element for corn in particular, with higher plantings and stocks levels above expectations in five out of the last seven years.

The day ended with the thinly-traded Jul 14 London wheat contract down GBP2.00/tonne at GBP139.00/tonne and with the more liquid new crop Nov 14 London wheat closing GBP1.60/tonne weaker at GBP136.00/tonne. Nov 14 Paris wheat closed EUR2.00/tonne weaker at EUR185.75/tonne, Aug 14 Paris corn was down EUR2.50/tonne at EUR170.00/tonne and Aug 14 Paris rapeseed was EUR4.50/tonne lower at EUR343.25/tonne.

For the month of June that puts London wheat was down GBP8.00/tonne, or 5.4%, with Paris wheat EUR5.75/tonne lower (-3%), corn down EUR3.50/tonne (-2%) and rapeseed EUR350.50/tonne lower (-2%), all basis the front month.

One of the reasons for the disparity between London wheat and the others is sterling strength. The pound rose by 2% against the US dollar in June, and by 1.7% versus the euro.

Another is ideas that excessive rains in some parts of Europe (and Ukraine too) may mean that there's more feed wheat around this year. There's also the competition in feed rations from another anticipated bumper corn crop a little bit further down the line.

The entire market also remains under seasonal harvest pressure. FranceAgriMer reported on Friday that the French barley harvest was 6% complete as of last Monday (versus zero a year ago at this time). Aquitaine (19% complete) and Bourgogne (14%) in the south west and Poitou-Charentes (13%) in the centre/east of the country were the most advanced regions.

Traders say that the French wheat harvest is likely to begin later this week. The German wheat harvest is probably a fortnight behind that. ADAS said that the UK winter barley and oilseed rape harvests are likely to start in a week or two, with wheat harvesting here set to commence a week or two after that.

Anecdotal reports suggest that some rapeseed crops were sprayed off over the weekend in parts of the south east.

"At the end of June most combinable crops are in good condition. Final yields will depend on the weather during grainfill, levels of lodging and harvest conditions," ADAS said.

There's optimism over yield potential given the good plant growth, reasonable disease control (albeit at a cost) and adequate moisture. Most weeds are well controlled although black-grass is an issue in some crops, they observed.

The EU Commission's MARS unit are forecasting UK wheat yields to average 8.05 MT/ha, a 9.1% increase on last season, 7.5% above the 5-year average and the highest since 2008. Barley yields are forecast around 4% up on both last year and the 5-year average, with oilseed rape yields seen more than 26% up on last year and nearly 10% above the 5-year average.

The UK should therefore return to the position of being a net wheat exporter in 2014/15, although those prospects won't of course be helped by the pound trading at a more than five year high of over 1.71 versus the US dollar today. Sterling also remains close to it's best levels against the euro since September 2012.

The Ukraine Ministry said that the early grain harvest there was completed on 557k hectares as of Friday, which is 6% of the planned area. That's produced a crop of 1.556 MMT so far, with yields averaging 2.79 MT/ha. It's only very early days yet, but it is worth noting that this yield figure represents a 12% increase on where things were 12 months ago.

The harvested total includes 1.411 MMT of barley of 497k ha and 142 TMT of wheat off 59k ha. They've also just begun the winter rapeseed harvest, producing 66 TMT off 41k ha.