EU Wheat Prices Falling In Line With US Markets

15/04/15 -- EU grains closed mixed, with wheat generally following US markets lower, but corn and rapeseed mostly a little firmer.

At the finish, May 15 London wheat was down GBP0.55/tonne at GBP117.95/tonne; May 15 Paris wheat was EUR1.50/tonne easier at EUR185.25/tonne; Jun 15 Paris corn was up EUR0.50/tonne at EUR165.50/tonne; May 15 Paris rapeseed was EUR0.25/tonne higher at EUR375.00/tonne.

US wheat markets remain under pressure from an improving weather outlook on the Southern Plains, with Chicago wheat prices having fallen by 8.6% so far this month. London and Paris wheat futures have been dragged down by the falling Chicago market, and all three are now threatening to test the March lows.

Market attention is now very much focused on new crop production prospects.

The Russian Ag Ministry maintained their outlook - that the country will produce 100 MMT of grains this year. That's a relatively modest 4.8% drop on last year, given all the trade chatter of poor establishment prior to winter and farmers' reduced ability to fund spring fieldwork activities.

An interesting development to the situation there today was Bloomberg reporting that the Russian Ag Minister said that they "may" decide on what to do next with the wheat export tax that was introduced on Feb 1 around May/June.

The decision will be based on the condition of the winter wheat crop, the report said. This is the first hint that the future of the duty is more dependent on 2015 production prospects than anything else.

In a separate report from APK Inform, a Russian official was quoted as saying that it was possible that the government could prolong the export duty into the 2015/16 marketing year. Up until now, most in the trade seemed to think that the two main considerations were would the duty run right through to the end of June or would it be abolished before then. Now we seem to have the possibility that it may in fact ultimately be extended.

It will be interesting now to see if new crop offers out of Russia still continue to be put up aggressively. According to Agritel yesterday, Russian new crop 12.5% milling wheat was being offered FOB the Black Sea at USD205/tonne for Jul/Aug shipment, which is the equivalent of less than GBP140/tonne.

Meanwhile, spring grain planting in Russia is still in its infancy at 5.9% complete on 1.8 million ha (versus 2.0 million this time last year).

In Ukraine, early spring grains (which excludes crops like corn and soybeans/sunflowers) have also been planted on 1.8 million ha, which is 81% of their anticipated total area. That consists mainly of barley, which has been planted on 1.4 million ha, or 80% of the government target.

According to the Ukraine Ag Ministry, 89% of winter grains have now had a fertiliser application, along with 87% of winter OSR.

Another interesting development yesterday was the EU Environment Committee voting 51-12 (with one abstention) to limit the percentage of biofuel made from crops to 7% of the mandated 10% target of final energy consumption in transport set to be achieved by 2020. The moved is aimed to accelerate the shift to producing biofuel from alternative sources.

In other news, Germany's DRV estimated the wheat crop there this year at 26.72 MMT, a fall of 3.8% versus a year ago. Barley production will drop 5.4% to 10.93 MMT, corn output will drop 7.8% to 4.74 MMT and that of winter rapeseed will decline 15.8% to 5.25 MMT, they said.

Ukraine said that it had shipped almost 200 TMT of wheat to the EU in Jan/Feb under the special duty-free quota agreement that exists. Italy was the main buyer, taking more than 131 TMT, followed by Spain (almost 30 TMT) and the UK (over 16 TMT).

UkrAgroConsult reported that Ukraine had exported 900 TMT of grains so far this month, of which 189 TMT was wheat and 717 TMT was corn.