EU Grains: A Quick Review Of The Week

Posted by Nogger - a legend in his own mind at 11:01 | Categorized as

26/12/14 -- EU grains finished the holiday shortened week generally higher than they began it, helped by news of an impending Russian export duty on wheat.

Jan 15 London wheat was up GBP1.70/tonne on Monday, a further pound higher on Tuesday and gained another 35 pence on Wednesday, for a GBP3.05/tonne advancement on the week. Paris wheat rose EUR2.50/tonne, EUR1.75/tonne and EUR0.75/tonne respectively, for a three day gain of five euro's. Corn was up EUR2.50/tonne on Monday, down a euro on Tuesday and up a further EUR3.50/tonne on Wednesday, for a net gain of also five euro's. Rapeseed was up EUR1.25/tonne, EUR1.50/tonne and another EUR1.50/tonne respectively, for a weekly gain of EUR4.25/tonne.

The Russians announced that they were going to introduce export duties on wheats on Monday, with the details due to be unveiled on Tuesday, although this never happened.

By the time I was waking from my festive slumbers on Boxing Day morning however, the inbox was full of emails saying that the duty will be for 15% of the custom cost, plus EUR7.50/tonne, and with a minimum value of EUR35/tonne. I assume that by "custom cost" they mean the net value of the cargo.

So there we have it, a duty of at least EUR35/tonne on every Russian wheat shipment, commencing Feb 1, 2015.

It's in the hands of the Russian government how much they are prepared to let through between now and when that particular window gets slammed shut.

The Russian deputy PM has already thrown in the rider that "additional administrative measures" will be used to prevent excessive grain exports, presumably with specific reference to the period between now and the end of January.

How Russian exporters, especially the smaller ones, are going to fund this minimum EUR35/tonne levy is unclear. The introduction of an export tax isn't grounds for claiming force majuere, and EUR35/tonne is much larger than the average margin that these guys will be working for.

Meanwhile, Russian intervention purchases Tuesday and Wednesday have hardly been met with a flood of offers, with the government picking up less than 20 TMT across the two days, despite increasing the price that they are prepared to pay.

In other news, 40% of winter grains in the Volgograd region of Russia are said to be a cause for concern, following a lack of moisture in the autumn, and a subsequent lack of a protective snow covering.

Across the border in Ukraine (there IS still a border there isn't there?), 4% of winter grains haven't yet emerged, and 19% of what has are now said to be in weak/thinned condition. That's up 3 points on earlier in the week and compared to only 4% this time a year ago.

In an Iraqi hard wheat tender, Romanian origin was said to be the cheapest offer at around £313/tonne, followed by Ukraine wheat at $323, Australian at $326, Canadian at $332 and US at $334 - Russian wheat wasn't offered at all.