EU Grains Consolidate Following Recent Rises

24/03/15 -- EU grains closed mostly lower, seemingly taking a little breather after prices have risen 8% in Paris wheat in little more than 2 weeks.

At the finish, May 15 London wheat was GBP1.50/tonne easier at GBP122.60/tonne, May 15 Paris wheat was down EUR3.00/tonne at EUR192.50/tonne, Jun 15 Paris corn fell EUR0.50/tonne to EUR162.75/tonne and May 15 Paris rapeseed dipped EUR1.50/tonne to EUR370.00/tonne.

Market attention is now turning to new crop. Yesterday's MARS yield estimates suggest lower 2015 production in most European countries this year.

If we match their yield figures with the HGCA's area estimate then the UK is in for a 2015 wheat crop of around 14.5 MMT this year. That would be a near 12.7% fall on production last year, if correct, although many consider that the HGCA are possibly a bit low with their wheat area forecast this year.

Using Origin Enterprise's area figure of 1.95 million ha, then the UK will produce a wheat crop of 15.75 MMT, a more modest 5% fall compared with 2014. I'd have to say that this is more like the sort of ballpark that I'd be in at the moment, although there's still a long way to go to the finishing post just yet.

The HGCA's winter barley area estimated, teamed up with MARS's yield figure, would give us a UK winter barley crop of 2.8 MMT versus around 3 MMT last year. On OSR a combination of the two estimates would suggest a winter OSR crop of 2.5 MMT. That seems like it could be significantly too high to me. Both the HGCA's area forecast and the MARS yield estimate are both too high to my mind.

MARS also forecast significant reductions in yields of wheat and barley in Ukraine this year, with the former dropping 10.6% and the latter by 19.1% compared with a year ago.

UkrAgroConsult meanwhile today predicted the Ukraine corn area to decline 10% to 4.4 million ha, with output falling 11.2% to 23.0 MMT this year. They also see wheat production in the war-torn country down by 8.4% to 20.6 MMT.

Early spring planting in Russia has been completed on 663k ha, or 1.3% of plan, according to the Ag Ministry there. Reports suggest that winter crop conditions in the important Volgograd region are rated 40% in poor condition, with only 20% of the crop described as "good".

Russia's two largest agricultural lending banks say that they've increased lending to fund spring plantings by just 1.2% this year. This is a very low rate of increase given the plunge in value of the rouble and the rising rate of inflation.

The cost of seed, fertiliser and herbicides/pesticides in Russia are said to be up by 40-60% compared with 12 months ago.

Few "ordinary" farmers can come up with the collateral to get a loan from the bank, despite government assurances that credit is available at special discounted rates to fund spring plantings, and those that can get a loan are being asked to pay around 22-27% interest, which is around double the rate of a year ago.

This would suggest that many winter crops that are in trouble may simply be left to their own devices, rather than being ripped up and re-planted. It might also suggest lower spring acreage than the government currently predict, and certainly lower yields as a result of reduced fertiliser/agrochemical applications.

Algeria are tendering for 50 TMT of optional origin new crop wheat for July shipment. Oman are in the market for 60 TMT of new crop Russian/German wheat for July/August delivery.