EU Grains Fall In Line With Slumping US Market, Large Global Stocks

16/04/15 -- EU grains continue to slide, despite the strong export programme. London wheat took out the March lows and settled at the lowest for a front month since October 20. For Paris wheat the March low of EUR181/tonne is still intact, but only just.

Slumping US wheat prices, large global carryover stocks and the ever-nearing 2015 harvest are all adding to the negative vibe.

The latest figures from the USDA put wheat stocks in the US up 16% this year, with those in Russia seen almost 66% higher and those in Europe rising almost 54% at the end of the current season.

The day ended with May 15 London wheat down GBP2.30/tonne at GBP115.65/tonne, May 15 Paris wheat fell EUR2.00/tonne to EUR183.25/tonne, Jun 15 Paris corn was EUR1.50/tonne lower at EUR164.00/tonne and May 15 Paris rapeseed fell EUR3.75/tonne to EUR371.25/tonne.

At the close, the May 15 old crop/Nov 15 new crop spread on London wheat had widened a little more to now stand at GBP10.15/tonne. By comparison the similar May 15/Dec 15 carry on Paris wheat is only EUR2.25/tonne.

Last week's nine month low volume of weekly soft wheat export licences (189 TMT) proved to be just a blip, with Brussels granting more than 740 TMT worth this time round. The season to date total of 26.42 MMT is now more than 2 MMT ahead of this time last year when exports went on to be a record high.

No surprises then that French analysts Strategie Grains raised their forecast for EU soft wheat exports by 2.1 MMT to a record 32.0 MMT. That reduces ending stocks to 16.2 MMT, although that's still a hefty volume to carryover. Ending stocks last season were less than 10 MMT, according to USDA figures.

Bloomberg reported that the French port of Rouen exported more than 240 TMT of soft wheat in the past week, up two thirds on the previous week. The volume was boosted by more than 200 TMT destined for Morocco - said to be the largest weekly total to that destination since at least Aug 2010. The figure also included a consignment of French soft wheat destined for the Philippines, the first such shipment also since at least Aug 2010.

Russian analysts ProZerno estimated the 2015 grain crop there at 100.4 MMT, which is slightly higher even than the official Ministry forecast. They see wheat production at 58.1 MMT (versus 59.7 MMT a year ago), with corn output falling to 10.9 MMT (from 11.3 MMT) and that of barley down to 17.6 MMT (from 20.4 MMT). Despite the reductions, an overall cut in grain production of only 4.6% looks surprisingly optimistic.

MDA CropCast trimmed their forecast for the EU wheat crop by almost 4 MMT to 143.16 MMT, a 4.3% decline on a year ago. The reduction was mostly due to acreage adjustments, they said. Dryness building in the UK, France and Germany got a mention.

The EU barley crop was also estimated lower than previously, down 300 TMT to 56.7 MMT, which is 1 MMT below last year. This was also due to revised acreage estimates.

What's happening to all that land you might ask. They seem to think that it's gone into rapeseed, forecasting the EU crop at 24.53 MMT, which is 3.44 MMT higher than previously and around 3.5 MMT more than the figure suggested by Oil World just a couple of days ago. I'm not aware of anybody else who currently shares this view.

On the international tender front, Ethiopia are in the market for 400,000 MT of optional origin milling wheat for July–August shipment.

New crop Russian 12.5% milling wheat was apparently offered in the market at USD198/tonne for Jul/Aug shipment. Old crop Ukraine 12.5% milling wheat was quoted at USD210/tonne. Both prices being on an FOB the Black Sea basis.