EU Grains Rise On Russian Worries

Posted by Nogger - a legend in his own mind at 20:36 | Categorized as

28/08/14 -- EU grains rose following news reports that Russian forces had mounted a military offensive in Eastern Ukraine. This prompted some short-covering, and possibly encouraged a little bit of spec buying too. Traders will recall that Chicago wheat jumped almost 30% following the Russian invasion of Crimea, even if it did subsequently give up all those gains, and then some.

The day closed with Nov 14 London wheat up GBP1.30//tonne to GBP121.75GBP/tonne, Nov 14 Paris wheat ended EUR1.50/tonne higher at EUR175.00/tonne, Nov 14 Paris corn was up EUR0.75/tonne at EUR152.75/tonne, whilst Nov 14 Paris rapeseed was EUR2.75/tonne firmer at EUR328.50/tonne.

Using the most evocative language he could think of, the Ukraine PM said that Russia had "unleashed a war in Europe" in what looks like a clear plea for help from the West. How this all pans out remains to be seen, but the possibility of further sanctions against Moscow can't be ruled out, although what form these might take is anybody's guess. The uncertainty of it all is probably enough to encourage some to think that the safest place to be right now isn't short of wheat, even if global production this year is to be at, or close to, record levels.

MDA CropCast today raised their forecast for EU-28 wheat production by 510 TMT from last week to 145.29 MMT on the back of improved yield estimates for the UK, without telling us specifically what that estimate was.

Brussels said that they'd issued 653 TMT of soft wheat export licences this past week, taking the 2014/15 seasonal total to date to 3.8 MMT. They also granted 122 TMT worth of barley exports, taking the cumulative total so far to 1.5 MMT.

In addition to that they authorised 164 TMT worth of wheat imports from Ukraine, under the existing preferential duty free tariff agreement that is in place until the end of October. The remainder of that 950 TMT quota is now less than 20 TMT, and is likely to be zero by next week. Ukraine's duty free corn quota has already been filled.

Ukraine said that they'd exported 4.5 MMT of grains so far this marketing year, including 2.4 MMT of wheat, 1.7 MMT of barley and 377 TMT of corn.

Morocco said that it's harvest was over, producing 5.1 MMT of wheat and 1.7 MMT of barley. For wheat that's a 27% decline on last year, although that number is actually 400 TMT more than the current USDA estimate. For barley it represents a 37% decline versus 2013, although it's very similar to the existing USDA forecast of 1.75 MMT.

Interestingly, despite the sharp fall in wheat production this year the USDA only has Morocco down to import 3 MMT of wheat in 2014/15 versus 3.9 MMT in 2013/14. Barley imports are forecast to rise from 500 TMT to 600 TMT.