Nogger's Blog

16/09/14 -- EU grains closed firmer in what looks like profit-taking and a technical rebound following the recent rout which has sent prices slumping to 4-year lows. Nevertheless, prices eased back in afternoon trade, closing well off the intra-day highs.

The day ended with Nov 14 London wheat up GBP0.60/tonne to GBP112.60/tonne, Nov 14 Paris wheat was EUR0.50/tonne higher at EUR162.00/tonne, Nov 14 Paris corn was also up EUR0.50/tonne EUR139.00/tonne and Nov 14 Paris rapeseed too was up EUR0.50/tonne at EUR324.00/tonne.

There may have been a bit of short-covering in London wheat ahead of Thursday's upcoming vote on Scottish independence, which some say could wipe 10-15% off the value of sterling should the "yes" vote claim victory.

If it doesn't, and that's the way the bookies overwhelmingly see it, then the pound could put in a little rally, although probably nothing like one of that magnitude.

Sterling was already under pressure today before the ONS said that inflation fell from 1.6% to 1.5% in August. That remains well below the Bank of England's 2% target, seemingly putting them under little pressure to think about an interest rate rise just yet.

The Russian harvest now stands at 86.7 MMT off 70.5% of the planned area (versus 71.7 MMT this time a year ago), with wheat accounting for 52.5 MMT of that total and barley a further 19.3 MMT. The 2014 Russian corn harvest is now 18% complete at 2.4 MMT, they added. Average Russian grain yields are up almost 19% versus a year ago.

SovEcon yesterday raised their forecast for the 2014/15 Russian grain crop to a very healthy 104-106 MMT, pegging exports at 31 MMT. They estimate the wheat crop at 60 MMT, with exports at 23 MMT - both numbers are a little higher than the USDA's forecasts of 59 MMT and 22.5 MMT last week.

APK Inform estimated domestic feed grain consumption in Ukraine at 17.8 MMT in 2014/15, a 4.1% rise on a year ago. They see barley consumption in feed at 3.85 MMT, up 8.6% and corn feeding at 7.35 MMT, a 2.1% rise.

It is noted that Ukraine have already exported 2.5 MMT of barley since the beginning of the 2014/15 season on Jul 1, which is the same as the figure that the USDA are currently using for the entire season. They have production down at 9 MMT this year, and total domestic barley consumption at 5.6 MMT, which suggests that they've once again massively concentrated their sales into the first quarter of the new season for cashflow reasons.

Will they do likewise with their corn crop, the harvesting of which is just getting going? Europe is already expecting a possible record corn crop of its own, which some forecasters are estimating at in excess of 70 MMT, according to a report on Reuters today.

Kazakhstan's 2014 grain harvest stands at 44.6% complete, producing a crop of 7.17 MMT to date, with yields down more than 9%.

In an interesting development for the French market, Senalia, the main silo operator in the port of Rouen, apparently said late last week that it was suspending wheat intake for "an indefinite period" due to low exports and the rapid rate at which its silos are filling up.

Senalia operate one of only two silos in the port that are approved delivery points for the Paris wheat contract. What would happen if both were full when the November contract is in delivery? Shorts would physically be unable to get a booking to deliver wheat against their sales, which is not the way that the futures market was designed to operate.

Late in the day Egypt's GASC bought three cargoes of French wheat at what looks like a very aggressive, some would say desperate looking, average price of $247.49/tonne cost and freight - the equivalent of just over GBP152/tonne.