EU Grains Retreat From Multi-Week Highs Set On Russian Jitters

24/10/14 -- EU grains closed mostly lower, and at or near session lows in wheat and rapeseed, at the end of a very choppy session. Good early gains were completely wiped out in late in the day selling after US grains turned red in end of week consolidation.

Wheat on both sides of the Channel, plus Paris corn and rapeseed all still managed to post weekly gains however.

The day ended with Nov 14 London wheat down GBP0.20/tonne at GBP119.80/tonne, Nov 14 Paris wheat was down EUR4.50/tonne at EUR165.75, Nov 14 corn was EUR1.25/tonne lower at EUR144.50/tonne and Nov 14 rapeseed fell EUR0.75/tonne to EUR323.00/tonne.

For the week, London wheat was still GBP3.35/tonne higher though, with Paris wheat adding EUR5.75/tonne, corn EUR2.00/tonne and rapeseed gaining EUR1.00/tonne.

Much of the early excitement surrounded warnings from SovEcon that Russian crop prospects for 2015 are already looking shaky. Whilst the Russian Ministry say that autumn winter grain sowing is now 98.5% complete on 16.3 million hectares (compared to 13.8 million this time a year ago), SovEcon say that the condition of these crops is "extremely weak".

A hard winter could therefore lead to much higher levels of winterkill than normal. Meanwhile the weakness of the rouble means that domestic prices of spring seed and other inputs are rising rapidly, which could also have a negative impact on spring cropping plans, and fertiliser/pesticide applications next year.

This currency weakness is also encouraging farmers to hold onto their 2014 crops as a hedge against the falling value of the rouble.

SovEcon said that grain production in Russia next year could ultimately fall below 90 MMT, with the wheat crop slipping under the 50 MMT mark.

The Russian Ministry say that the 2014 grain harvest is 94.4% complete on 42.6 million hectares, producing a crop of 106.7 MMT to date. Wheat accounts for 61.1 MMT of that total, with barley adding an extra 21 MMT. Both those harvests are almost done. There's still a quarter of this year's corn still out in the fields though. That harvest total to date stands at 9.1 MMT.

The Urals region is the main area left with a large area still unharvested, with almost 27% of crops there still to be cut compared to around 9% a year ago.

Nov 14 London wheat hit GBP122.00/tonne earlier in the session, a level not seen since the last day of August. Nov 14 Paris wheat touched GBP172.00/tonne, a near 7 week high. Although the market ultimately gave up all of these gains, these Russian jitters are unlikely to have gone away. The market will be acutely aware that Russia has seen two crop disasters in the last 5 years, both of which have largely been responsible for sending London wheat to over GBP200/tonne.

EU soft wheat exports meanwhile continue to beat even last season's record pace. Brussels issued 646 TMT worth of soft wheat export licences this past week, taking the cumulative marketing year total to 9.1 MMT, an 8% rise compared to a year ago. Remember that the EU Commission sees final soft wheat exports down by almost 17% in 2014/15 versus last season's record.

Societe General forecast French soft wheat sowings at 4.98 million hectares, with those in Germany at 3.23 million, for the 2015 harvest. Both figures are almost identical to plantings last year.

FranceAgriMer said that the 2014 French corn harvest was 38% complete as of Monday, double what it was the previous week, and well ahead of only 14% done this time a year ago. Early yield reports are generally very good.

They said that the French winter wheat crop is 55% planted versus 34% a week ago and 51% a year ago. The crop is 34% emerged against 18% last week and 31% a year ago. The French winter barley crop is 80% sown, up from 55% a week ago and 5 points ahead of this time last year.