EU Wheat Posts Modest Gains, Russian Crop Estimates Rising Though

04/08/14 -- EU grains closed mixed, but mostly high. London wheat traded both sides, but generally managed a modestly higher close, despite the one thing that the trade does currently seem certain of is that Europe is in for a large feed wheat surplus this year.

The day finished with Nov 14 London wheat up GBP0.35/tonne at GBP122.35tonne, Nov 14 Paris wheat ended EUR1.50/tonne firmer at EUR173.25/tonne, Aug 14 Paris corn was down EUR3.50/tonne at EUR160.00/tonne, whilst Aug 14 Paris rapeseed was unchanged at EUR328.00/tonne.

As well as a larger wheat crop in 2014/15 (estimated at 147 MMT last week by the IGC - a 2.7% increase on last year and the second largest ever), Europe will also see higher corn production this year (up 3.8% to 66.4 MMT). It's the combination of the larger than normal market share of feed grade out of a bumper wheat harvest, and increased competition from corn that's keeping London wheat under pressure.

The prospect of another season of big EU corn imports from the likes of Ukraine doesn't augur well for too much upside potential for feed wheat prices awhile yet either.

Paris wheat meanwhile doesn't know what to do, follow Chicago up, or relinquish some more of the premium that it currently holds over the London market. In essence nobody seems to know right now what average specification wheat in France is this year, and even more importantly what quality can actually be delivered against the futures contract.

Friday night's closes put the premium held by the Nov 14 Paris wheat contract over it's London counterpart at around $25/tonne - which is historically rather high. Whether that premium is justified without knowing what the deliverable specification is on the MATIF contract is questionable.

In other news, Agritel said that Ukraine seaports had exported 494.1 TMT of grains in the week Jul 28-Aug 3. That was up from 463.2 TMT and week previously and included 183.7 TMT of wheat, 284 TMT of barley and 23 TMT of corn.

The country's exports for 2014/14 (Jul/Jun) now stand at 2.36 MMT, including just over 1 MMT of barley and slightly under that volume of wheat. Corn exports so far are fractionally less than 300 TMT.

The Ukraine National Weather Centre said that early grain harvesting there had been rapid, due to warm and dry weather, saying that winter wheat yields could be the highest on record for independent Ukraine. The weather conditions may be harming corn crop development though, they added.

The Russian Ag Ministry said that they'd exported 2.827 TMT of grains in the period Jul 1-30, a 17.5% increase on the same period in 2013. Wheat accounted for 2.436 MMT of that total, and barley a further 331 TMT.

They also said that Russia had now harvested 52.3 MMT of grain off 33.6% of the planned area, with yields up more than 20% at 3.34 MT/ha. That total includes 44% of the anticipated wheat area, producing a crop of 40.2 MMT to date. Yields are said to be averaging 3.61 MT/ha, a near 19% rise on last year at this time.

In addition the country has harvested 6.6 MMT of barley (off 24.4% of plan) and almost 419 TMT of rapeseed (off nearly 20% of the planned area).

IKAR today raised their estimate for the 2014 Russian wheat crop from 57.5 MMT to 58.5 MMT (a 6-year high), which is now sightly higher than what looked like a highball estimate of 58.2 MMT from ProZerno last week. With 40.2 MMT already cut off less than half the planned area, even that estimate may still prove to be too low.