EU Grains Trade Mostly Higher As US Markets Awaken
17/02/15 -- EU grains trade mostly higher, with May 15 London wheat up GBP1.30/tonne at GBP126.70/tonne at around noon, Mar 15 Paris wheat is up EUR2.00/tonne at EUR190.75/tonne, Mar 15 Paris corn up EUR1.25/tonne to EUR154.00/tonne and May 15 Paris rapeseed unchanged at EUR356.25/tonne.
News that UK inflation fell to its lowest level on record in January (0.3%) seemed to make little difference to sterling, which was up a tad against the dollar, and a bit lower versus the euro.
US markets re-opened on a firmer footing following yesterday's holiday.
The situation remains tense in Ukraine with both sides blaming the other for failing to adhere to the fragile ceasefire, and neither complying with the Monday night deadline to start withdrawing heavy weaponry from the front line.
UkrAgroConsult said that 20% of Ukraine's winter rapeseed crops are in a poor state, which is four times more than this time last year. The Ukraine Ag Ministry say that 18% of winter grains are in a similar condition.
Given the fact that the domestic currency has fallen from around 8 versus the US dollar to something like 26 in the last 12 months, inflation running at around 25% and forecast to go higher, and the fighting in the east of the country, there has to be significant doubts over 2015 crop production prospects in the country.
I read today of one Ukraine agri company in the Kharkiv region (to the north of the main fighting and rebel held area) saying that they expect to sharply reduce their spring plantings this year due to "significant difficulties purchasing raw materials and technical resources". Their spring barley are will more than halve and corn plantings will be down by more than two thirds.
Similar comments about Ukraine continue to apply to Russia, despite the Ministry of Economic Development forecasting 2015 grain production to only drop 4.5% to 100.5 MMT this year. Around 21% of winter grains in Russia are in an "unsatisfactory" condition, they say.
The Russian government say that they are allocating RUB35.7 billion (around $567 million) to subsidise agricultural producers across all sectors of the industry this year. Where that money will come from, and if it really is readily available is unclear.
Currency weakness and inflation are problems here too, discouraging Russian farmers from selling what they have left of the 2014 harvest.
The Russian government only picked up 1,215 MT of grains at today's intervention purchase round, taking the total bought so far to only 354 TMT out of an intended target of 2.5-3.0 MMT.
Algeria announced a tender for milling wheat for June shipment. Bangladesh cancelled their tender to purchase wheat on a technicality, but are expected to re-tender again in the next few days. French wheat won their business last time they bought and is expected to figure again.
