Nogger's Blog

27/01/15 -- EU grains traded lower, with Paris wheat trundling along towards the middle of the recent trading range.

Front month Paris wheat hasn't closed outside the EUR190-200/tonne range so far this year, whilst London wheat has been stuck in the GBP125-135/tonne for the same period - although it wasn't too far from falling below that level today.

At the close Mar 15 London wheat was down GBP2.00/tonne at GBP125.30/tonne, Mar 15 Paris wheat was EUR3.25/tonne easier at EUR193.25/tonne, Mar 15 Paris corn was down EUR2.50/tonne at EUR155.00/tonne and soon to expire Feb 15 Paris rapeseed slumped EUR6.50/tonne lower to EUR346.25/tonne.

The market either doesn't seem to know, or care, that winter crop conditions in Russia are far from ideal after autumn sown wheat went into dry soil, followed by an early cold snap that stopped growth.

Of the 1.3 million hectares of winter grains planted in the Volgograd region, around 40% is said to have failed to germinate, or have succumbed to winterkill after a cold and snowless winter. Of the approximate 780,000 ha that has made it through winter so far, less than a third is rated to be in "good" condition.

In Rostov meanwhile some 700,000 ha, or 32% of the area planted with winter grains is said to have suffered a similar plight.

Well, they can just replant those lost acres in the spring, right? Sure if you've got the money, if not then short-term borrowing rates are running at 30-32%, if you can find a bank that's willing to lend at all.

Meanwhile, S&P cut their assessment of Russia's sovereign credit rating to "junk" status yesterday night, sending the rouble lurching to fresh all-time lows against the dollar and euro.

The Russian government were back in the market looking to buy grain for their intervention fund today. They managed to pick up a princely 12 TMT, taking the total volume purchased so far to 335 TMT out of an intended target of 2.5-3.0 MMT.

Russian growers prefer to hang onto their grain as a hedge against spiralling inflation and the sinking rouble, rather than sell it to the government.

In other news, Reuters are reporting that the details of the recent accord between the Ukraine Ministry and the country's grain exporters are that only 900 TMT of wheat can be shipped out in Q1 of 2015, followed by a maximum of 400 TMT in Q2.

The Ukraine Ministry said that the country had already shipped 21.2 MMT of grains so far this season, of which 8.57 MMT was wheat. Wheat exports as of Dec 31 were around 8 MMT, suggesting that more than half of the Q1 quota has already been shipped this month.

The Ukraine Food Minister said only last week that there would be no limit set on wheat exports this year.