EU Grains Lower On Global Economic Woes, Russia/Ukraine Issues Ignored

02/02/15 -- EU grains traded mostly lower to begin February, with the week and new month beginning pretty much where the old one left off.

At the close, Mar 15 London wheat was GBP1.35/tonne easier at GBP120.75/tonne, Mar 15 Paris wheat was EUR2.50/tonne lower at EUR183.00/tonne, Mar 15 Paris corn was down EUR2.00/tonne at EUR151.75/tonne and new front month May 15 Paris rapeseed was down EUR0.75/tonne at EUR348.75/tonne.

The market continues to slide, helped on its way by a variety of outside influences. Bearish Chinese economic data today added to the general global macroeconomic woes. After a little month-end upward blip on Friday, presumably linked to profit-taking, crude oil was back on the slippery slope again today too.

Meanwhile the Baltic Dry Index, a measure of what it costs to ship raw materials around the world, and often said to be a barometer for general global economic health, closed at a 28-year low on Friday - below even the lows of 2008 when it fell 90% in value in just a few months.

Yet for all this there are certainly one or two skeletons lurking in the closet that could come back to haunt this market yet. At the head of those are probably Russia and Ukraine, yet these issues continue to be getting largely ignored.

There was further violence in Eastern Ukraine again over the weekend, where "the financial situation is becoming more and more difficult" and various agro companies "face issues regarding the delivery of nitrogen fertiliser," said Agritel.

The Ukraine Ministry reported winter crop conditions unchanged from a week ago at 18% weak/thinned, which is the equivalent of 1.4 million hectares.

Ukraine's grain exports via seaports dropped off sharply last week, down to 279.3 TMT versus 529.9 TMT the week previously. Corn accounted for 71% of last week's exports (198.2 TMT), down from 86% the previous week.

Things weren't much different in Russia last month, where the leading grain hub port of Novorossisk exported 484.3 MMT of grains in January, down 57.4% versus December and 10.5% below exports in January 2014. Wheat exports accounted for 86% of the Jan 2015 total, with Egypt the top home.

The Russian rouble hit new lows against the US dollar on Friday after their Central Bank cut interest rates 2 points, and remains close to those levels today. Russian food inflation is now said to be running at 17%, up from 15.4% at the end of 2014, and could hit 22-23% by the summer, one leading analyst forecast.

To add to Russia's economic woes, Bloomberg say that almost 25% of corporate foreign currency debt in the country matures in February. That could further pressure the RUB/USD rate with more than $10 billion in dollars required to repay that debt this month, they said.

Meanwhile Russian weather conditions across the autumn and winter so far were described as "abominable" for crop production potential, and worse even than they were in late 2009.

On the tender front, Tunisia bought 117 TMT of milling wheat and 50 TMT of feed barley over the weekend. Ethiopia were said to have bought 70 TMT of milling wheat. Saudi Arabia also struck for 690 TMT of EU, North American, South American or Australian 12.5% milling wheat in their weekend tender.