EU Grains Rise As Dollar Recovers, Exports Stay Strong

19/03/15 -- EU grains closed mostly higher, as the dollar reverted to type following what the HGCA say was its biggest one day fall in six years yesterday. The pound and euro both fell around a cent or more against the US currency today compared to last night's closes.

At the finish, Mar 15 London wheat was GBP1.80/tonne firmer at GBP121.25/tonne, May 15 Paris wheat was up EUR2.25/tonne at EUR194.50/tonne, Jun 15 Paris corn fell EUR0.25/tonne to EUR163.50/tonne and May 15 Paris rapeseed rose EUR0.75/tonne to EUR371.00/tonne.

For Paris wheat this was a near 8-week closing high for a front month. Strong exports again provided support, with Brussels announcing a further 780,000 MT of soft wheat export licences this past week. That takes the season to date total now to 23.7 MMT, widening the gap between this season and the last. The 2014/15 to date total is now 8% up on a year ago, and you won't need me to remind you again that last season saw a record volume of wheat exported by the EU, a feat which was generally not expected to be bettered this time round.

Yet here we are, 8% ahead of a year ago, and with the gap between then and now widening. The euro was trading at close to 1.40 versus the US dollar 12 months ago. Tonight it closed below 1.07 for a year-on-year fall of more than 23%.

Various trade estimates for crop production in 2015/16 are now starting to filter through, with most predicting a decline in world wheat and corn output in the season ahead, although not by that much. Current season carryover stocks look set to remain high though, depressing values for next season, without a serious weather problem emerging from somewhere.

MDA CropCast estimate the EU-28 all wheat area to rise slightly for the 2015 harvest, although by less than 1%, whilst barley plantings will increase 1.7% at the expense of OSR sowings falling 6.5%,

They increased their forecast for the EU-28 all wheat crop for the year ahead by 400 TMT from last week to 147.08 MMT, a modest 2% decline versus 2014/15. That's slightly higher than Copa Cogeca's recent 146.2 MMT forecast. MDA estimate EU wheat yields to average 5.67 MT/ha versus 5.86 MT/ha a year ago and Copa Cogeca's 5.64 MT/ha forecast.

MDA estimated the EU-28 OSR crop down 90,000 MT from last week to 21.09 MMT, which is a 7.8% fall compared with last year, due to reduced plantings, lower anticipated yields and also noting dryness building in Germany, Poland and the Czech Republic.

They see the EU-28 barley crop unchanged on a year ago at 57 MMT.

Reuters put some flesh on the bones of yesterday's rumoured 400-500 TMT of high protein wheat purchases said to have been made by China, saying that they bought 300 TMT of Canadian and 150 TMT of Australian origin material.

Syria announced a tender for 150 TMT of optional origin milling wheat today.

Russia said that spring grain plantings were off to an earlier than normal start, with 471,000 ha sown so far. Although that's less than 1% of the intended area, it compares favourably with only 102,500 ha this time a year ago.

Russian grain stocks as of Mar 1 were up 15% versus a year ago at 26.1 MMT, according to Rosstat.

Ukraine said that their early spring grain planting (which doesn't include crops like corn) was 14% complete on 343k ha. Winter grains have had fertiliser applied on 72% of the planted area, and 74% in the case of winter OSR, said the Ukraine Ag Ministry.

In other news, there's been some interesting debate going around concerning US corn plantings and yield prospects this year - before virtually any of this year's crop has even got into the ground (save for Texas).

Whilst just about everyone expects corn plantings to fall, the general consensus is that they won't drop by that much. Farm Futures Magazine yesterday estimated the 2015 US corn area at 88.34 million acres, down by 2.3 million (or 2.5%) compared to last year. Societe Generale today suggested an area of 89.7 million acres, only 1% less than a year ago.

The most interesting part of the debate concerns yield potential. With several analysts noting that yields have fallen sharply (by at least 7% and in one case by more than 18%) in each of the four big corn record yield years since 1990.

One theory doing the rounds is that these bumper production years have subsequently been met by a slump in prices, thus encouraging US growers to reduce their planted area, and cut seeding rates, plus apply less fertiliser and agrochemicals the following year in an effort to save money. Hence, yields are usually significantly lower the season after a bumper US corn crop. Throw in the likelihood that a year with near ideal growing conditions such as 2014 is unlikely to be followed by another as equally benign, and the argument gains a bit of further traction.