EU Grains Lower, MARS Warns On Winter Crop Conditions

26/01/15 -- EU grains closed lower. The euro was little changed despite the results of the weekend elections in Greece. Perhaps that had done all its falling last week?

At the finish, Mar 15 London wheat was down GBP1.00/tonne to GBP127.30/tonne; Mar 15 Paris wheat was EUR2.00/tonne easier at EUR196.50/tonne; Mar 15 Paris corn was EUR1.75/tonne lower at EUR157.50/tonne; Feb 15 Paris rapeseed was down EUR3.75/tonne to EUR352.75/tonne.

The EU Commission's MARS unit released their latest winter crop condition report today, and sounded a few alarm bells for production prospects later in the year.

"Our latest frost-kill model simulations show no or only a slight degree of hardening in the Mediterranean region and a wide (parts of central/northern/western Europe) area between Ireland and eastern Poland, due to the fact that this region experienced mostly warmer-than-usual daily temperatures since early December," they said.

"Winter wheat only partially reached the hardening stage in some parts of Germany, the Czech Republic, Slovakia and in the Balkan Peninsula. The weakly hardened crops run the risk of incurring frost-kill damage in the event of a sudden freezing air intrusion accompanied by shallow snow cover.

"Due to the dry autumn, the establishment of winter wheat was less than optimal in the northern and north-eastern parts of Ukraine, as well as in the Central Federal District and northern half of the Southern Federal District of Russia. As a result, the emergence of winter wheat was problematic and the crop remained weaker and smaller than usual at the start of winter. Model calculations indicate the occurrence of crop damages in southern Russia and parts of Bulgaria, Romania and Poland.

"Considering the poor condition of winter wheat, it is probable that the north-eastern regions of Ukraine are also affected by frost kill, and that the actual damages are even more serious in Russia than the model results indicate. The shallow snow cover currently in Belarus, the western and central areas of Ukraine, and southern Russia, may lead to further frost-kill damages in the event of bitterly cold temperatures," they added.

Meanwhile, an upsurge in fighting in Ukraine over the weekend has the rouble back under pressure today on talk of increased Western sanctions against Russia. There are also implications for grain production and exports out of the affected south eastern parts of Ukraine, now that the rebels have reached as far as the port of Mariupol.

On the fundamental front, APK Inform said that Ukraine seaports had shipped out 529.9 TMT of grains last week, and are now majoring their efforts almost entirely on corn, which accounted for 455.7 TMT of that total (86%).

The President of the Ukraine Grain Association said that export houses and the government were working on the text of the agreed "memorandum of understanding" reached between the two sides a couple of weeks ago. These are widely expected to cap wheat, particularly milling wheat, exports even though the Ukraine Food Minister said only a few days ago that there would be no limits set.

Russia said that it had exported 22.089 MMT of grains so far this season (to Jan 21), a 29.7% increase on a year ago. That total consists mostly of wheat (17.341 MMT, or 78.5%), along with 3.273 MMT of barley and 1.195 MMT of corn,

Those figures imply that Russia exported around 500 TMT of grains for the week to Jan 21, taking exports for the first three weeks of the month to around 1 MMT. December's full month exports were in excess of 3 MMT, so there has certainly been a considerable drop off in pace this month. Russia's new wheat export duty kicks in at the weekend.