EU Grains: Rally, What Rally?

18/07/14 -- Blink and you might have missed it, yesterday's attempted rally in EU grains following the shooting down of the Malaysian passenger plane over Eastern Ukraine proved to be a very short-lived window of opportunity (if you can call 298 deaths due to an act of terrorism an opportunity). Not that much, if any, business was probably done on the back of it in the cash markets.

EU grains closed lower across the board with Nov 14 London wheat erasing all of yesterday's gains finishing GBP3.00/tonne lower at GBP129.00/tonne, Nov 14 Paris wheat was down EUR3.75/tonne to EUR179.25/tonne - closing back below the important EUR180/tonne level. Aug 14 Paris corn was down EUR2.25/tonne at EUR166.75/tonne and Aug 14 Paris rapeseed slumped another EUR5.50/tonne to EUR317.25/tonne.

For the week that puts front month London wheat down GBP1.55/tonne, with Paris wheat falling EUR1.25/tonne, corn down EUR2.25/tonne and rapeseed crashing EUR14.00/tonne.

Harvest pressure remains, although rains on the continent have slowed progress this week, and could also be doing some damage to quality it is thought. The UK too is bracing itself for the widespread thunderstorms and associated heavy rains that traditionally accompany the kids breaking up for their summer school holidays with near perfect timing.

That could ultimately mean less milling wheat and more feed grade wheat kicking around both here and on the continent, potentially increasing milling premiums, which will provide a welcome and needed little boost if it's milling wheat that you've got. It won't do a lot for feed wheat growers though, and could widen the gap between London and Paris wheat further. Talking of gaps, it's worth noting that the premium that Nov 15 London wheat now commands over Nov 14 has widened to GBP12.25/tonne compared to just 50 pence at the end of March.

Brussels confirmed that they'd issued 151 TMT of soft wheat export licences this past week, taking the new 2014/15 season total to 501 TMT so far. They've also granted 211 TMT worth of barley exports, taking the marketing year total to date to 569 TMT. As wheat goes out, corn comes in though, with 387 TMT worth of corn import licences issued, taking the new season total so far to 644 TMT.

The EU also granted 18,160 MT worth of duty free wheat import licences to Ukraine, taking the total issued so far to 145 TMT out of an agreed quota of 950 TMT that Ukraine is allowed to export to the EU by Oct 31 under a special preferential trade agreement.

The Russian grain harvest is gathering pace at 15.4% done producing a crop of 24.9 MMT so far. Yields are up sharply, averaging 3.51 MT/ha, an increase of 16.6% on last year at this time. Wheat accounts for 20.5 MMT of that total off 22.7% of the planned area.

FranceAgriMer said that the French wheat harvest was 5% done as of Monday versus 2% a week ago and 2% complete this time last year. The French winter barley crop advanced to 83% done versus 78% last week and 40% complete at this point in 2013. They said that 28% of the corn crop is silking, up from 7% a week ago and versus zero this time last year.

They said that 70% of the French wheat crop was rated to be in good/very good condition, unchanged on a week ago. Winter barley and corn rated good/very good were also unchanged on a week ago at 71% and 83% respectively.

Egypt said that reforms to their subsidised bread programme will cut their wheat import needs by around 30%.

Ukraine new crop corn offers are now said to be down to $188/tonne FOB, which is the equivalent of around GBP110/tonne. Oct/Dec optional origin corn CIF the Netherlands is said to be offered in the market at EUR165/tonne, which is around GBP130.60/tonne, with feed wheat offers around just EUR3/tonne higher.