EU Grains Mixed, Prices Hover Just Above 4-Year Lows

13/08/14 -- EU grains closed mixed. London wheat was mostly a touch higher, recovering some of yesterday's losses that saw prices end close to recent 4-year lows. Paris wheat closed within less than a cent of the Jul 31 low, whilst London wheat finished only GBP0.25/tonne away from its Aug 1 low.

The day ended with Nov 14 London wheat up GBP0.20/tonne at GBP122.25/tonne, Nov 14 Paris wheat was EUR0.75/tonne lower at EUR171.25/tonne, Nov 14 Paris corn was unchanged EUR154.00/tonne and Nov 14 Paris rapeseed was down EUR0.50/tonne to EUR321.75/tonne.

In amongst the detail of last night's USDA report was an increase in the size of the the UK wheat crop, up from the 15.3 MMT forecast last month to 15.4 MMT, a 29.2% rise year-on-year. They forecast the UK barley crop at 5.9 MMT, unchanged from last month and 16.8% down versus 2013. They tweaked higher their estimate for the UK OSR crop, up from 2.53 MMT to 2.57 MMT, a 20.8% rise compared with last year.

Whilst the forecast for the EU wheat crop was essentially unchanged at just under 148 MMT, exports were cut by 3 MMT due to the various quality issues being experienced around Europe.

The EU barley crop was increased from the 55.9 MMT forecast in July to 56.2 MMT, and the OSR crop was also estimated a little higher at 22.65 MMT versus 22.4 MMT previously.

Significant improvement in production potential in Russia and Ukraine was noted. Russia's wheat crop was increased a hefty 6 MMT to 59 MMT, enabling them to potentially export 22 MMT of wheat in 2014/15, a 4 MMT or 22% increase versus last season. Russia's 2014 barley production estimate was also raised by 2 MMT to 18.5 MMT, a 20% increase on a year ago. Their barley exports in 2014/15 were increased by 300 TMT to 3.8 MMT, a sharp 40.7% rise versus last year.

Ukraine's wheat crop was increased by a more modest 1 MMT from last month to 22 MMT, only a small drop on 22.3 MMT last year. Barley output was increased from 7.8 MMT to 8.2 MMT, an 8.5% increase year-on-year.

The EU corn crop was also forecast higher, seen benefiting from the recent rains that have disrupted the wheat harvest, at just over 67 MMT that represents an increase of almost 5% versus 12 months ago.

Russia said that it had now harvested 60.2 MMT of grains off just over 40% of the planned area, including 43.4 MMT of wheat off 47.9% of plan. Wheat yields are said to be averaging 3.58 MT/ha versus 3.02 MT/ha a year ago.

The USDA said last night that Russian wheat yields were "outstanding" - forecasting them to average 2.48 MT/ha, an 18% increase versus the 5-year average. You will notice that this figure is still well below the 3.58 MT/ha that the Russian Ministry themselves say is the average so far.

Rusagrotrans said that Russia had exported 3.12 MMT of grains in July, a record for the first month of a marketing campaign, and 24% up on July 2013.

UkrAgroConsult raised their forecast for the 2014 Ukraine grain crop from 57.4 MMT to 58.5 MMT in clean weight. They also increased Ukraine's 2014/15 grain export potential by 2.5% from last month to 32.5 MMT. Ukraine's grain exports so far this season (Jul 1 - Aug 11) were 3.03 MMT, a 48% increase on the same period in 2013/14.

The desire to turn grain into dollars remains strong in Russia, and particularly Ukraine where the local currency - the hryvna - has lost a further 13% of it's value against the US dollar in the past fortnight and is down more than 37% since the turn of the year.

Competition from both Ukraine and Russia looks like continuing to be pretty fierce for a while yet. Ukraine new crop corn prices are said to be down to around $183-184/tonne, less than GBP110/tonne FOB the Black Sea.