EU Wheat Gives Up Most Of It's Early Gains

18/12/14 -- EU grains finished the day mixed. Wheat arced to fresh highs for the move shortly after the opening bell, but gave up a lot of those gains by the end of the session.

The day ended with Jan 15 London wheat down GBP0.50/tonne to GBP135.40/tonne; Jan 15 Paris wheat was EUR1.50/tonne firmer at EUR200.25/tonne; Jan 15 Paris corn rose EUR2.25/tonne to EUR158.00/tonne; Feb 15 Paris rapeseed jumped EUR4.75/tonne to EUR349.50/tonne.

Jan 15 Paris wheat traded as high as EUR209.25/tonne at one point, more than ten euros up on last night's close.

The news out of Russia appears to confirm that they have created a 'de facto' grain export ban to all but Egypt, Turkey, Armenia and India - and only the former two countries are significant buyers of Russian wheat.

Egypt say that they are confident that they will get everything they have bought of Russian origin, and they probably will, along with Turkey. Whether they will be able to purchase anything else depends on whether Russian exporters fancy sticking their neck out.

Sources in Russia suggest that staff at the Veterinary and Phytosanitary Surveillance Service (VPSS), who are responsible for issuing export licences, have been quietly told to withhold certificates for all but the four destinations mentioned above.

Essentially this would appear to mean that Russia are out of the export market, for all but these four, for the time being. Even if Egypt are an approved home, there are reports of delays in obtaining the necessary certificates for vessels bound for that destination too in recent weeks.

Other countries with Russian wheat already bought will now be considering their position, and presumably looking for the sellers involved to arrange delivery from other origins. Depending on the price involved these exporters might start talking force majuere that they can't supply the originally contracted grain. Either way, it creates more buying interest for other origins, like Europe.

This is a bit of a windfall opportunity for European and other sellers, who generally have plenty of wheat still to sell. How high prices might yet go is open to conjecture, ultimately knocking two, three, or even more million tonnes off Russia's 2014/15 grain exports doesn't really make a huge difference to the global supply and demand situation. 

The rouble has finally arrested its steep decline, after massive Central Bank intervention and a huge hike in interest rates to an eye watering 17%, although few would bet against another period of weakness.

Prospects for production in 2015 are still under a large cloud of uncertainty, and these could really put some fuel on the fire yet.

Meanwhile, talking of 2015 crop prospects, French analysts Strategie Grains today forecast the EU 28 soft wheat crop at 140.2 MMT next year, a 5% fall versus 2014. The UK and Germany will each see a 2 MMT fall in output, they said. 

Barley production will drop 4% to 58 MMT, and the EU 28 corn crop will decline 9% to 67.6 MMT, they added.

Their figures are pretty similar to those of Copa Cogeca from the other day, they went for 139.75 MMT, 55.8 MMT and 68.8 MMT respectively.