Nogger's Blog

19/09/14 -- EU grains closed lower across the board, with London and Paris wheat sliding to levels not seen since July 2010, and corn to its worst since June of that year.

The day ended with Nov 14 London wheat down GBP1.45/tonne to GBP111.55/tonne, Nov 14 Paris wheat closed EUR5.50/tonne lower at EUR153.50/tonne, Nov 14 Paris corn was down EUR2.75/tonne to EUR137.00/tonne, whilst Nov 14 Paris rapeseed was EUR4.75/tonne easier at EUR318.25/tonne.

For the week that puts Nov 14 London wheat down a relatively modest GBP1.10/tonne compared to the EUR9.25/tonne loss suffered by Nov 14 Paris wheat. Nov 14 Paris corn was down EUR3.25/tonne versus last Friday, whilst Nov 14 Paris rapeseed was EUR2.75/tonne easier.

The pound rose to 1.28 against the euro following the announcement that Scotland had voted 55:45 in favour of staying in the Union, although it gave up all of those gains later in the day, it was still higher for the week.

Paris wheat simply took a pasting, although it's difficult to put a specific reason to why, even if Chicago wheat also crashed to 4-year lows of it's own. Maybe the recent furore over the vague and variable nature of the contract quality requirements had something to do with it. Why should what is little better than feed wheat command such a premium as it recently has? Maybe some are aiming to simply make delivery of lower grade wheat (the supply of which far outstrips demand anywhere else) against the contract - assuming that there is actually some room in the silos of Rouen by then. If there isn't, then nobody really knows what will happen.

A month ago Paris wheat was commanding an EUR21.50/tonne premium to London feed wheat, tonight that differential has fallen to EUR12/tonne.

Or perhaps it was simply the realisation that much of this French wheat simply has to be sold, regardless of what price can be achieved for it (as with this week's GASC tender), to make room for the impending record large corn crop that's about to start coming in?

Late in the afternoon FranceAgriMer said that harvesting of that hadn't started as of Monday. They did however increase the proportion of the crop rated good to very good by one percentage point from a week ago to a large looking 86% versus only 55% this time last year.

There's a similar situation brewing in the States, with words like "phenomenal" and "bewildering" and "stellar" being used to describe early US corn and soybean yields.

The oft asked "how low can it go" question is still doing the rounds. In the case of Chicago corn some are now suggesting that a fall below $3/bu could be on the cards before too long. The next support level for London wheat is GBP110/tonne, and if that breaks then we are then looking at GBP100/tonne.

Meanwhile the 6 week long "sideways" pattern that existed in Paris wheat, as support at EUR170/tonne held, already seems like a distant memory. The market has quickly plunged a further EUR16.50/tonne, almost 10%, since that level was first breached just 10 days ago.

The Russian grain harvest rumbles on, if something that big can rumble. That now stands at 88.6 MMT off 72.6% of plan, with average yields up 17.5% at 2.62 MT/ha. Wheat currently accounts for 53.8 MMT of that total, off 73.2% of plan. Barley adds a further 19.6 MMT, off 85.3%, and corn 2.8 MMT, off 20.7%.

Winter plantings in Russia for the 2015 harvest are already well advanced, at 56.2% complete on 9.3 million hectares, up from only 5.6 million ha a year ago at this time. Note though that has been sown has largely gone into dry seed beds, especially in the Southern District. That sadly is only a very small crumb of comfort to the bulls. The forecast for the region is much wetter than normal across the next 15 days.

Ukraine meanwhile has now harvested 12% of it's planned 2014 corn area, producing a crop of 2.4 MMT to date. If this is marketed in the same desperate manner as they have been doing with wheat, barley and rapeseed (and it probably will be), then that doesn't bode well for prices in the coming months - especially with a record large EU crop also on the way.

The Ukraine Ministry said that the country had exported 7.2 MMT of grain so far this season, including 4.12 MMT of wheat and 2.55 MMT of barley. The latter figure now surpasses the USDA forecast for the entire season after just 2 1/2 months of it.

Brussels said that they'd issued 505 TMT of soft wheat export licences this past week, taking the season to date total to 5.8 MMT. That's 100 TMT more than at this time last year, which is good, even if prices have needed to be cut to get the sales away. Don't forget that the USDA currently expects EU wheat exports to fall more than 18% this year versus 2013/14.

On the flip side of the coin, cumulative EU corn import licences have now been granted for 2.1 MMT, more than double the 911 TMT issued this time last season.

UK customs data released yesterday showed that the UK imported over 194 TMT of wheat and more than 100 TMT of corn in July - the first month of the new marketing year.