EU Wheat Back In The Red

26/08/14 -- EU grains closed mixed, but mostly lower, with the exception of rapeseed. The "insurance" premium built in prior to the weekend to cover against an escalation of tensions between Russia and Ukraine/the West was essentially taken away again. This came following news that the Ukraine President was to meet with Russia's President Putin in Belarus in an effort to resolve the fighting with pro-Russian separatists in the east of the country.

The day ended with Nov 14 London wheat down GBP2.40/tonne at GBP120.60/tonne, Nov 14 Paris wheat was EUR0.75/tonne lower at EUR172.75/tonne, Nov 14 Paris corn was down EUR1.00/tonne EUR151.00/tonne and Nov 14 Paris rapeseed was EUR2.75/tonne higher at EUR324.25/tonne.

Egypt's GASC bought 175 TMT of Russian/Romanian wheat for late September shipment in a tender, with Russian origin getting the lion's share. French wheat was offered, but was out-priced, although not by much based on the cheapest price on the table. All in there were four French cargoes offered, that might be a sign that all is not completely lost with regards to the quality of this year's crop there.

Ukraine wheat wasn't offered, reinforcing the view that the quality of their crop this year isn't great. Some early season sales were made to Egypt, but what had been shipped so far is said to be disappointing in terms of both hagberg and gluten levels.

The Ukraine Ministry said that the country's wheat harvest was now 99% complete, producing a crop of 24.4 MMT so far in bunker weight, versus a clean weight harvest of 22.3 MMT last year. Estimates on how much of this year's crop will only be suitable for feed vary to anywhere from 40-70% compared to around 25% last year. Certainly that means that there will be a lot more Ukraine feed wheat looking for a home this year. That could put some further downwards pressure on the London market, especially when the EU and Ukraine 2014 corn harvest gets underway.

Russia said that their 2014 grain harvest had reach 72.3 MMT, including 46.7 MMT of wheat. The Ministry raised their grain export forecast again today, now projecting foreign sales at 27.5-30.0 MMT, which would potentially beat the 2011/12 record of 27.02 MMT. Weakness of the Russian rouble and strong demand for what is essentially the cheapest quality wheat in the world at the moment is keeping local prices fairly well supported. Russian farmers seem to be reasonably keen to accept these levels to fund their autumn planting program and settle their debts.

Russia is said to be to discuss a deal with Iran to swap wheat for oil next month.

Algeria meanwhile said that it would not accept wheat of mixed origin against any of its tenders. They would normally buy most of their wheat requirements from France, who have reportedly been importing milling wheat from the UK and Lithuania in the past couple of weeks. It's market conjecture that these imports have been made with a view to blending them with some of this year's inferior quality French wheat to "up the spec" for wheat to be exported to homes such as Algeria.

Driving around South Yorkshire and Lincolnshire yesterday it was apparent that there's still a fair bit of wheat left to harvest in the region, maybe 15-20% or so at a guess. This isn't a huge corn growing region, but what was on display looked to have excellent potential.