EU Wheat Prices Slip To Multi-Month Lows As Yield Prospects Raised

27/04/15 -- EU grains closed mostly lower to start the week, with Paris wheat ending below EUR180/tonne for the first time on a front month since Nov 24. London wheat finished at the lowest on a front month in more than 6 months.

The session ended with May 15 London wheat down GBP0.95/tonne at GBP112.45/tonne, May 15 Paris wheat was EUR3.50/tonne lower at EUR179.50/tonne, Jun 15 Paris corn fell EUR1.25/tonne to EUR159.50/tonne and May 15 Paris rapeseed managed a net gain of EUR1.25/tonne to close at EUR376.75/tonne.

The EU Commission's crop monitoring arm, MARS, raised their forecast for EU-28 yields of soft wheat, barley, rapeseed and corn from a month ago - essentially estimating yields of all four crops to be below last year's bumper results but better than the previous five year average in all cases.

They estimate the 2015 EU-29 soft wheat yield at 5.89 MT/ha, up from the 5.79 MT/ha predicted a month ago. That's 3% down on last year's 6.07 MT/ha, but 3.7% above the 5-year average.

For barley they go for an average yield of 4.71 MT/ha versus 4.63 MT/ha in March, down 3.6% compared to 4.89 MT/ha a year ago, but 2.5% higher than the previous 5-year average.

They now predict an average corn yield of 7.22 MT/ha this year. That's up from 7.19 MT/ha a month ago, 9% down on last year's 7.93 MT/ha, but 3% above the average for the last 5 years.

For OSR they estimate average yields of 3.35 MT/ha versus 3.25 MT/ha a month ago. That's down 6.4% compared to last year's 3.57 MT/ha, but again above the recent average by 6.9%.

Warmer than normal conditions prevailed almost everywhere in Europe in the period under review (Mar 1 to Apr 20), although it was also drier than normal in large parts of central and western Europe, they said. Conditions have been largely favourable for winter crop growth and spring plantings, they added.

This is certainly true of the UK, although crops in the south would now welcome some rain, they suggested. Luckily, that's exactly what's in the forecast too.

As far as UK yields are concerned, they reflect the potential seen elsewhere - below last year but better than the recent average. That shouldn't be too difficult given some of the poor results seen in recent years.

For wheat they predict an average UK yield of 8.08 MT/ha, down 6.3% on 8.62 MT/ha last year, but 5.8% above the 5-year average. For barley they go for a figure of 6.04 MT/ha, down 7.1% from a year ago but 2.4% above average, For rapeseed they predict an average yield of 3.68 MT/ha versus 3.71 MT/ha in 2014, but still 5.1% above the recent average.

In other news, APK Inform said that Ukraine seaports exported 503.9 TMT of grains in the past week, up from 298.5 TMT the previous week. Wheat accounted for 83 TMT, corn 358.5 TMT and barley 58 TMT of the past week's total.

Russian seaports exported 236.6 TMT of grains, up from 202.8 TMT the previous week. Wheat made up 46.1 TMT, corn 101.6 TMT and barley 82.9 TMT of the most recent week's total, they added.

As expected, Russia's exports have dropped off significantly since the export duty on wheat was introduced on Feb 1. Since then (to Apr 22) then country has exported 4 MMT of grains versus 4.9 MMT in the same period a year ago. Wheat shipments have more than halved in that period to 1.37 MMT.

That means however than carryover into 2015/16 will be high. Russian grain stocks as of Apr 1 were 22.7 MMT, up 3.4 MMT (or 17.3% higher) compared to a year ago.

IKAR said that Russian rains in March and April have improved crop production prospects. They now forecast the 2015 Russian grain crop at 95-101 MMT versus the official Ministry estimate of 105.3 MMT in 2014. Exports in 2015/16 are estimated at 26-31 MMT, of which 17-21 MMT will be wheat, they said. Russian exports so far this season are at 27.36 MMT, including 19.84 MMT of wheat, according to the latest Ministry figures.

So, it's starting to look like the bulls best hope for a decent rally in the wheat market - sharply lower production in Russia/Ukraine in 2015 - isn't as likely to happen as seemed possible a few months ago.

US wheat futures closed down heavily again tonight - Chicago wheat finished at the lowest for a front month since the last day of June 2010. Fund money has made a lot of money on the way down, and the latest figures show them to be sitting on a record large short position approaching 100k lots in Chicago wheat - the equivalent of more than 13 MMT.

Perhaps the best hope for the bulls now is for something unexpected to come from left field to spook them into stampeding to covering that short position in. But what and when?