EU Grains Fall In More Orderly Trade

08/10/14 -- EU grains closed mostly a little lower in more orderly trade than we have seen in the past couple of days.

The day ended with Nov 14 London wheat down GBP0.85/tonne at GBP113.65/tonne, Nov 14 Paris wheat was down EUR2.50/tonne at EUR160.25/tonne, Nov 14 Paris corn was down EUR3.00/tonne at EUR140.75/tonne and Nov 14 Paris rapeseed fell EUR2.75/tonne to EUR328.00/tonne.

The erratic nature seen in the last two sessions was missing today, with fresh news relatively thin on the ground. It may be that traders have now positioned themselves where they want to be ahead of Friday's USDA report, so trade ahead of the release of that could be quiet.

It's front month Nov 14 London wheat that's been particularly volatile these last few days as traders exit their positions before the contract is in delivery. "This process can sometimes lead to the contract in question becoming more technical with prices reacting to who is long or short, rather than being representative of the overall market place," said the HGCA today. They suggest growers to switch their attention to the May 15 contract, which now has a larger open interest, for a more reliable barometer to what the market is really doing.

The NFU reported the highest UK wheat yield on record thanks to ‘perfect’ weather and crop protection. They see average yields in 2014 at 8.6 MT/ha, at the top end of the ADAS estimate of 8.4-8.6 MT/ha released earlier in the week. That would represent a 16% increase on last year, which would be the largest percentage rise in 30 years, they say.

They forecast wheat production (excluding Northern Ireland) at 16.67 MMT, using area estimates from the HGCA. That would be a 40% jump on last year's disappointing crop.

Separately, the Scottish Agricultural Census pegged cereal plantings north of the border at 462k ha for the 2014 harvest - the highest since 1998.

Defra will release their official UK crop production estimates on Friday.

There's been a lot of talk lately of Russia stepping away from the export market. They exported around 11.5-11.7 MMT of grain in the first quarter of 2014/15 (Jul/Sep). That's in the region of 38-39% of the 30 MMT what they are expected to ship out during the whole of the marketing year. Whilst shipments are declining month-on-month, they are still holding up pretty well though. August exports were around 4.6-4.7 MMT (a record for any month), falling to about 3.7 MMT in September, and with an anticipated further step down to 3.0 MMT in October.

Harsher winter weather, if and when it arrives, can also lead to a seasonal disruption in Russia's grain exports. Current weather conditions in Russia are unusually dry, in contrast to excessively wet this time a year ago. That has enabled rapid progress to be made with winter plantings for the 2015 harvest. These have already been completed on 13.4 million hectares, or 81.5% of the anticipated area, and are far higher than the 8.7 million ha sown this time a year ago.

These crops could now do with some moisture, to help establishment ahead of winter, but the 14 day forecast remains dry for much of the major winter cropping areas in the southern and central regions.

Russia bought 26,865 MT of grain for its intervention fund today, taking the total bought so far to 83,680 MT since this season's program was launched on September 30. The government's stated aim is to procure up to 5 MMT of grain, so they haven't made much of a dent in that target yet. An acutely weak rouble means that selling to exporters potentially offers better returns. Much of the grain that the intervention fund has picked up has apparently been in recently acquired Crimea, where exporting it is nigh on impossible due to the political situation there.

The Russian Ministry said that the country's 2014 grain harvest now stands at 101.5 MMT, with 10% of the planned area still to be cut. Wheat accounts for 59.5 MMT of that total and barley a further 20.7 MMT. The country's corn harvest is only just past halfway, at 52% done, producing a crop of 6.4 MMT so far. APK Inform estimate final corn production this year at 12.3 MMT, a 6% rise on last year.