EU Grains Mostly Lower Amid "Heavy Supplies"

05/03/15 -- EU grains closed mostly a little lower on the day, despite some early support from dollar strength compared to both the pound and euro.

The day ended with  Mar 15 London wheat down GBP0.15/tonne at GBP116.60/tonne, Mar 15 Paris wheat was down EUR1.75/tonne at EUR182.75/tonne, Jun 15 Paris corn rose EUR0.75/tonne to EUR157.75/tonne and May 15 Paris rapeseed was down EUR4.50/tonne at EUR361.25/tonne.

The FAO raised their forecast for the 2014/15 global wheat crop by 3 MMT to a record 727 MMT, and up 11 MMT on a year previously. Ending stocks were hiked 7 MMT to 199 MMT, which is 20 MMT more than a year previously.

"Heavy supplies, strong competition for export business and mostly good prospects for the 2015 global harvest pressured wheat markets. While Russia’s exports started to slow, availabilities elsewhere were seen as more than adequate to compensate. Demand for EU wheat, in particular, stayed strong, with export sales maintaining a record pace," they noted.

Production prospects for 2015/16 are seen at 720 MMT on a global level, a relatively modest 1% decline on this season.

In Europe however next season's crop is estimated down 5.5% at 147 MMT, with Russia's seen falling 6.8% to 55 MMT and Ukraine's down 8.3% to 22 MMT,

"In the EU, the crop is generally in good condition and is well developed owing to the mild winter conditions. Only local and limited frost-kill damages may have occurred in Bulgaria, Romania, Hungary and Poland," they said.

In Russia "the crop is dormant and conditions are mostly favourable under normal weather conditions. Earlier dry conditions in the fall, and subsequent below average temperatures may have reduced crop hardiness and therefore there could be some need to re-sow in the spring though this will only be determined after snowmelt," they added.

Various experts gathered at a grain conference in Rostov, Russia threw their tentative early grain production forecasts into the ring for Russia later this year.

The President of the Russian Grain Union was perhaps the most diverse. He said that the country would most likely produce around 93-94 MMT of grains this year, down around 10% from 103.8 MMT in 2014.

He did however also say that production could rise to 100 MMT "under ideal circumstances and availability of resources" - I don't think that many people would bet that Russian growers are going to get either of those conditions this year.

In a worst case scenario he said that output could drop to 75-78 MMT, a 25-28% decline. He didn't however think that things were likely to get as bad as this, he added.

Domestic Russian grain consumption in 2015/16 was estimated at around 70 MMT, so if the latter scenario were to come to pass, then that wouldn't leave a great deal left over to export - although note that carry-in stocks are seen at an unusually high 17 MMT following the recent introduction of the current export duty and Russian growers' reluctance to sell.

In Ukraine, the head of the Hydrometeorlogical Centre estimated 2015 winter wheat yields to fall 8%, with production down to 21-22 MMT versus 24.3 MMT a last year. Around 1.2 million ha of autumn sown crops may need replanting, he said.

In other news, FranceAgriMer estimated French grain stocks as of Feb 1 to be 22% higher than a year ago at 21.54 MMT. Soft wheat accounts for 9.22 MMT of that total (up 13%), barley 3.94 MMT (up 31%) and corn 7.41 MMT (up 38%).

Defra said that the volume of wheat milled in the UK in the 4 weeks to Jan 24 was up 5.3% on a year ago at 542,100 MT. mainly due to increased usage by UK bioethanol plants which were then working at a higher rate than last year. The proportion of home grown wheat in the grist was up 6.1% at 456,100 MT.

Meanwhile the latest statistics on cereal usage in animal feed in the UK show wheat losing a little bit of market share to barley. "Wheat accounted for 68.2% of total cereals (wheat, barley, corn and oats) used in retail compound feed production in January, compared with 68.9% in December. The percentage of barley, however, went up from 22.1% to 23.3%," note the HGCA.