EU Grains End In The Red Again, Breaching Or Testing Long-Term Support

Posted by Nogger - a legend in his own mind at 09:09 | Categorized as

07/07/14 -- EU grains had a quiet morning, with the overnight Globex market remaining closed following Friday's Jul 4 celebrations across the pond. That all changed when US markets kicked into life in afternoon trade, and a sea of red opening in Chicago drew a similar response here in Europe.

The only contract that didn't end lower was expiring old crop Jul 14 London wheat, which went off the board officially unchanged at GBP132.20/tonne. New front month new crop Nov 14 finished GBP1.30/tonne lower at GBP133.20/tonne. Nov 14 Paris wheat was down EUR2.00/tonne at EUR182.50/tonne, Aug 14 Paris corn slipped EUR0.75/tonne to EUR170.25/tonne and Aug 14 Paris rapeseed finished EUR3.50/tonne weaker at EUR334.25/tonne.

Nov 14 London wheat set a new lifetime contract low of GBP133.00/tonne, and the spread between that and Nov 15 has tonight widened to over GBP10.00/tonne.

Chicago corn prices hit 4-year lows, falling below $4 on the September future, and with Dec 14 only just managing to hold above those levels. Benign weekend weather in the US was the reason for the fall, with some analysts saying that conditions are "almost ideal" and "superb" for corn entering July pollination - for all the recent talk of excessive wetness.

London wheat and Paris rapeseed have already fallen below support levels to trade at 4-year lows, and Paris wheat is threatening to test long-term support around the EUR180-181/tonne mark, a level that hasn't been breached since late 2011.

The nattily named Ukrgidromettsentra said that Ukraine's 2014 grain crop could reach 63 MMT, close to last year's record, if production of around 1.0 MMT from Crimea was still factored in. They see the Ukraine 2014 winter wheat crop rising from 21.8 MMT last year to 22.5 MMT, with spring wheat output up from 0.42 MMT to 0.44 MMT. Winter barley production will rise from 2.8 MMT to 3.6 MMT, and the spring crop will be up from 4.68 MMT to 5.3 MMT.

Ukraine's 2014 corn crop meanwhile will just fall short of last season's bin-busting 30.9 MMT, but not by too much at 29.3 MMT, they said.

The Ukraine Ministry said that the early spring grains harvest (which excludes corn) was now 17% complete as of Jul 4 on 1.636 million hectares, producing a crop of 4.664 MMT to date with yields averaging 2.85 MT/ha. That's slower than last season's pace when 2.695 million ha had already been harvested, producing 7.118 MMT of grains, as this year's harvest has been hampered by rain. Even so yields are 8% up on last year.

Winter wheat has been cut on 661k ha, producing 1.936 MMT with yields averaging 2.93 MT/ha, with winter barley cut on 946k ha, producing 2.671 MMT with yields at 2.82 MT/ha, they said.

The Russian Hydrometeorlogical Centre said that the Russian 2014 grain harvest would beat last season's total of 92.4 MMT, and would "significantly exceed the 5-year average" without giving an exact forecast. The Russian Ministry have production this year at 97 MMT.

The Russian Ministry said that their harvest is also slightly behind year ago levels at 8.3 MMT off 2.3 million ha, versus 10.6 MMT off 3.2 million ha in 2013. Yields however are better than last year here also, averaging 3.68 MT/ha, a more than 11% increase.

IKAR said that Russia already has around 5 MMT of new crop wheat forward sold, however in Europe one French trader told Reuters "the context is very different from last year when there were a lot of sales already booked to offer shipments for the newly arrived crop. This time we only have Algeria as a harvest outlet."

Germany's DBV forecast the wheat crop there at almost 25 MMT versus 24.6 MMT a year ago. They see rapeseed production at similar levels to last year - 5.7 MMT.

Prices at these levels are at least stimulating some buying interest, but these orders will be fiercely contested over.

Algeria last week bought 100,000 MT of optional origin barley for Oct/Nov shipment. Turkey are tendering for 235,000 MT of optional origin milling wheat for Aug-Oct shipment, whilst the also seek 200,000 MT of barley of optional origin for Aug-Sept shipment. The UAE is in for 100,000 MT of corn and 30,000 MT of barley, although South America and Australia are the preferred origins. Morocco also seeks 170,000 MT of wheat, but intends to buy it on the domestic market.