EU Grains Rise For Second Day, Is The Rout Over?

02/10/14 -- EU grains rose for a second day, with the ECB's decision to leave Eurozone interest rates on hold taking some of the recent acute weakness out of the euro.

The day ended with Nov 14 London wheat up GBP2.50/tonne to GBP111.00/tonne, Nov 14 Paris wheat closed EUR3.25/tonne higher at EUR158.00/tonne, Nov 14 Paris corn was up EUR1.50/tonne to EUR142.25/tonne, whilst Nov 14 Paris rapeseed was EUR0.50/tonne firmer at EUR320.75/tonne.

Is that it? Is the rout finally over? It's lasted 4-months, or at least the most recent round of it has. We probably won't know the answer to that question until we get next Friday's WASDE report from the USDA.

That is expected to confirm new all time high, unprecedented US corn and soybean yields. Certainly as far as corn is concerned, these are said to be off the scale of anything that's ever been seen before. FCStone yesterday estimated US national yields at 178.4 bu/acre versus a previous estimate of 174.1 bu/acre and 4% higher than the USDA's current estimate of 171.7 bu/acre.

In Illinois they put the average yield at 221 bu/acre, up 20 bu/acre from their previous estimate and a massive 14%, or 27 bu/acre, above the USDA's September estimate.

How can the USDA be so far out on yields? The answer seems to be that this summer's mild and wet Midwest conditions mean that the length of your average US corn cob this year is much longer than normal, and therefore contains more grain kernels.

The USDA have hitherto based their yield estimates on historical averages for the number of kernels per cob, I understand. They should however now have enough real 2014 harvest data at their disposal to come up with a more accurate reflection of this year's exceptional crop.

The disparity between US corn and wheat prices is still pretty high, so one more kick in the guts for corn from the USDA next week could potentially see wheat prices fall to yet new lows. Only time will tell.

Before that we've got Stats Canada and Informa Economics out with their latest crop production forecasts tomorrow.

Russia said that their 2014 grain harvest had now reached the 99 MMT mark, off 39.5 million ha, or 87.4% of the intended area. Wheat accounts for 58.6 MMT off 21.7 million ha (88.3%), with barley adding a further 20.5 MMT off 8.6 million ha (94.6%) and corn an additional 5.5 MMT off 1.2 million ha, or 44.8% of plan.

Russian farmers have already sown an area of 12.3 million ha of winter grains for the 2015 harvest, the Ministry added. That's up sharply from only 8.2 million ha this time a year ago and constitutes almost 75% of the anticipated area.

EU soft wheat export licences continue to run neck and neck with last year's pace, which is a supportive factor given that full season exports are expected to show a significant year on year decline. Brussels issued 417 TMT worth of soft wheat export licences this past week, taking the season to date total to 6.8 MMT versus 6.9 MMT a year ago. Lack of availability of quality wheat could be a hindrance to exports later in the season though.

Ukraine said that they'd exported 45% more grain in the first three months of the 2014/15 marketing campaign than a year ago. Exports stand at 8.6 MMT in Jul/Sep, according to the Ag Ministry. These include 4.9 MMT of wheat, 2.9 MMT of barley and 640 TMT of corn, they say.

Russian 12.5% milling wheat FOB the Black Sea is offered in the market at around $233/tonne versus Ukraine 11.5% milling wheat at $225/tonne and the winning French offers in yesterday's GASC tender were $223.70/tonne. French new crop corn offers FOB Bordeaux are at EUR137/tonne.