EU Grains Higher As Weekly Exports Set New Record

06/02/15 -- EU grains posted mostly small gains on the day, and with modest advances for the week, as the pace of exports remains brisk.

At the finish, Mar 15 London wheat was up GBP0.10/tonne to GBP123.75/tonne; Mar 15 Paris wheat was EUR1.25/tonne higher at EUR188.25/tonne; Mar 15 Paris corn was EUR0.25/tonne firmer at EUR155.75/tonne; May 15 Paris rapeseed was down EUR1.00/tonne to EUR356.75/tonne.

For the week on a front month basis, London wheat gained GBP1.65/tonne, with Paris wheat up EUR2.75/tonne, Paris corn EUR2.00/tonne higher and Paris rapeseed adding EUR6.50/tonne.

Brussels announced that it had issued a record 1.67 MMT of soft wheat export licences this past week, taking the season to date total back up above last year's record pace at 18.4 MMT.

You will recall that the EU Commission raised their forecast for EU soft wheat exports by 2 MMT to 30 MMT earlier in the week, which would just top last season's record 29.989 MMT. This week also brought another 300 TMT clean sweep for Europe in the latest Egyptian tender from GASC.

The alarm bells have continued to ring this week relating to the state of winter grains in Russia, with one analyst saying that 21% of the crop is in poor condition nationally, and 29% is poor in the normally most productive areas in the Central and Southern regions.

There have also been experts voicing concern about the weak Russian rouble and Ukraine hryvnia, and raging inflation in both countries, combined with the generally lack of access to credit and how this will affect farmers' ability to carry out their normal spring activities.

The Ukraine Minister of Farm Policy told us this week that the cost of the spring planting campaign there is up by 150% versus a year ago.

SovEcon forecast the 2015 Russian grain crop at 86 MMT versus 104 MMT last year earlier in the week. IKAR today estimated production this year at 85-95 MMT. One other analysts view I saw said that output could fall as low as 65 MMT, in a worst case scenario, if yields fall to the low levels of 2003.

Clearly opinion for prospects this year is already widely divided. Nobody is forecasting higher production though, that's for sure, it's more of a case of how low could it go?

Next week brings the February WASDE report from the USDA, which may provide some direction, although as far as 2015/16 goes they don't usually start to issue production forecasts for the coming season until May.

At home there's still a large exportable surplus of wheat in the farmers' hands, despite news that UK millers’ usage of wheat (including starch and bioethanol) in December was a record 674 TMT. Demand from the bioethanol sector for the remainder of the season now looks questionable though.

The pound closed at its highest level against the euro since January 2008 tonight, which won't help the UK export effort. The euro meanwhile remains close to a 12-year low of 1.12 against the US dollar set in late January, which helps explain why the success being achieved on the export front is mostly coming from the Continent.