Nogger's Blog

05/08/14 -- EU grains closed mixed, wheat was higher and corn and rapeseed lower.

The day ended with Nov 14 London wheat up GBP1.15/tonne at GBP123.50/tonne, Nov 14 Paris wheat was EUR1.50/tonne higher at EUR174.75/tonne, Aug 14 Paris corn fell EUR1.50/tonne to EUR158.50/tonne and Aug 14 Paris rapeseed dropped EUR2.25/tonne to EUR325.75/tonne.

Reuters reported that an announcement on minimum quality standards acceptable for French wheat to be delivered against the Euronext contract is expected this week. That should hopefully clarify the situation. Depending on what they say, the Paris contract could rise, or conversely retreat closer to the price of feed wheat.

There are reports that the quality of Ukraine's wheat crop may also have been adversely affected by rain this year, just days after the local Weather Centre said that yields could be highest since the country gained independence.

Volume is not the problem, the Ukraine Ministry said that the country had already harvested 90% of the intended wheat area, producing a crop of 19.4 MMT to date. Local consultancy ProAgro said that 35% of this year's crop might only be feed grade, up from 25-30% a year ago.

By comparison Russia's 2014 wheat harvest is said to be 77.5% milling standard and 22.5% feed grade.

Harvesting there is going well, very well in fact if the figures coming from the Ag Ministry are to be believed. They say that the country has already produced 53.9 MMT of grain off less than 35% of the planned area. This time a year ago the harvest only stood at 40.2 MMT. Yields are said to be averaging 3.32 MT/ha, a near 20% rise on last year.

Wheat accounts for 40.7 MMT of that total, off less than half (44.5%) of the planned area. Barley is responsible for a further 7.9 MMT of the total off less than a third (28.8%) of plan.

Russian grain exports also continue at a rapid pace. Having exported close to 3 MMT in July (a record for the month), total shipments in August are expected to rise to 3.5-3.6 MMT, according to Rusagrotrans. Domestic wheat prices in Russia are said to be steady as exporters scramble for supplies to fulfil existing sales obligations and ship wheat out of the country before Western sanctions start to bite.

There's a school of thought that the real effect of restricting Russian banks' access to Western capital markets won't really show up until farmers thoughts turn to planting for the 2015 harvest in the autumn.

Russian farmers may experience difficulties in obtaining finance to fund their winter planting programme, and the weak rouble will also increase input costs for the 2015/16 harvest. That could have a detrimental effect on crop production next year.