French Crop Concerns Support EU Wheat And Rapeseed Markets

23/07/14 -- EU grains closed mixed with Nov 14 London GBP0.05/tonne lower at GBP127.60/tonne, Nov 14 Paris wheat was up EUR1.50/tonne to EUR179.50/tonne - although just failing to stay above the important EUR180/tonne level. Aug 14 Paris corn was down EUR2.50/tonne at EUR157.75/tonne and Aug 14 Paris rapeseed jumped EUR7.00/tonne to EUR321.75/tonne.

Continued talk of widespread problems with the quality of this year's French wheat harvest supported the Paris market today. The wetness that is causing the problems for wheat is viewed as beneficial for corn however, and it also potentially means that there will be more feed wheat on the market in 2014/15, in direct competition to corn.

Could the London and Paris wheat markets go in opposite directions? In dollar terms tonight's close puts the spread between the two Nov 14 contracts at around $24/tonne. That's the largest differential since May 2013. However "back in the oft-cited year of poor quality of 2007 we saw the spread between the two jump to $60/tonne, so we’re not seeing anything historic just yet," says my Twitter chum Tregg Cronin at Halo Commodities in the US.

"The currency influence and the lighter volume can make these spreads volatile, but the Paris Wheat/UK wheat spread is worth paying attention to," he notes. It may also be worth keeping an eye on the wheat/corn spread too.

Reuters report a French exporter this week buying Polish milling wheat to cover existing sales that they would have expected to fulfil with French material. French traders have also been said to be seeking/buying German wheat this week.

Egypt's GASC bought 235 TMT of Russian, Romanian and Ukraine wheat in their tender for Sep 1-10 shipment. The prices paid were said to be around $256.60 C&F, that's down from around $260-261 C&F paid for Romanian wheat for late August shipment a fortnight ago. Some might see the fact that there were no French offers made as being significant.

Jordan passed on a tender to purchase 100 TMT of optional origin hard milling wheat and immediately re-tendered for the same, in their usual way. Iran is said to be looking for 50 TMT of Black Sea wheat for prompt shipment.

Russia's 2014 grain harvest is now 20.8% complete, producing a crop of 33.6 MMT to date, with average yields of 3.47 MT/ha, an 18.8% increase on this time last year. Wheat accounts for 28 MMT of that total off 30.7% of the planned area. Wheat yields are averaging 3.6 MT/ha versus 3.1 MT/ha a year ago, say the Ag Ministry.

The Ukraine early grains harvest (which excludes corn) meanwhile is already 60% complete producing a crop of 19.1 MMT. Yields are averaging 3.22 MT/ha, up more than 9% on a year ago. Wheat accounts for 13.1 MMT of that total with yields at 3.49 MT/ha. The Ukraine Ministry say that 63% of the wheat harvested so far is of milling standard (versus around 70% a year ago).

The French rapeseed harvest has progressed to the north east of the country, and yields so far are disappointing and seed sizes are small. Wet weather in Germany means that the rapeseed harvest there has stalled, giving rise to yield and quality concerns.

The UK rapeseed harvest meanwhile is said to be around halfway done, with yields "slightly above average" but with the prospect of better yields to come, according to ADAS. Even slightly above average would be a big improvement on a year ago. Earlier in the week MARS increased their forecast for UK yields from 3.76 MT/ha a month ago to 3.81 MT/ha. That's 28.1% up versus 2013 and 11.4% above the 5-year average.

Wheat prospects in the UK also still look promising. After a couple of poor harvests in a row, maybe we were due a change of luck in 2014?