EU Grains Crash Although Rapeseed Manages To Buck The Trend

05/05/15 -- EU grains closed mostly lower, with only Paris rapeseed managing to buck the trend for a second successive session.

The day ended with May 15 London wheat down GBP3.80/tonne at GBP108.10/tonne, May 15 Paris wheat crashed EUR5.25/tonne to EUR171.00/tonne, Jun 15 Paris corn fell EUR1.75/tonne to EUR153.50/tonne whilst Aug 15 Paris rapeseed added EUR2.25/tonne to close at EUR356.25/tonne.

London wheat finished just 50 pence away from the lowest close for a front month since 2010. Things weren't quite so bleak for Paris wheat, where this was "only" the lowest close on a front month since last November.

Essentially what we appear to be seeing here is growing confidence in another year of very good, whilst not record, global wheat and corn production. That's mixed in against a background of high carryover stocks left over from last year.

There's only 8 weeks to go now until the end of the 2014/15 EU wheat marketing year. "As at 30 April the price gap between May-15 UK feed wheat futures and the rolling post-planting average (since 1 October) was GBP24.92/tonne, demonstrating a growth in the price gap of GBP9.07/tonne since 1 April 2015," note the HGCA.

"New crop (production) prospects are currently looking positive, highlighting that 2015 could be a lean price year for UK arable farmers," they add.

As far as global wheat stocks go, these are currently forecast 5.7% higher at the end of the current season than they were a year ago. At 197.21 MMT that means that more than a quarter of the entire global 2014/15 wheat crop is still going to be in storage as we enter the new crop year.

As ever, it's not just the size of the stocks that matters, it's who has them.

Despite a strong export campaign, record production last year means that stocks in the EU will be more than 50% higher at the end of 2014/15, Russia's will be almost two thirds higher, Ukraine's are seen up by nearly half and those in the US will increase by 16%, according to the USDA.

Of the top six global wheat exporters then, four of them are looking at sharply higher ending stocks this season. Of the remaining two, Australia's are seen about equal to year ago levels, only Canada will see a reduction - their carryover is estimated 42% lower this year.

News that Russia is looking to end the current punitive export duty on wheat from 15 May was a bearish influence today, even if they are suggesting that it might be replaced with a smaller "token" tax of some sort. It also indicates growing confidence in their own new crop production prospects.

Egypt's GASC stepped into the ring to see what was about today, and bought one cargo each of Russian and Romanian wheat at what was reported to be the lowest prices in at least two years.

The fact that seventeen cargoes were offered in the tender, with nine of them being of Russian origin, was also seen as another bearish factor.

Iran were reported to have bought 25,000 MT of Ukraine milling wheat for LH May shipment. They've been a big buyer of Black Sea and German wheat this season, and are forecast to import around 6.5-7.0 MMT by the end of the current campaign. That is not expected to be the case in 2015/16 however when their foreign buys are estimated at only 2 MMT, according to the country's Ag Ministry.

In other news, France said that they'd exported 4.7 MMT of corn in the first 8 months of the current season (Jul/Feb), an increase of 35% on a year ago. Joint top buyers were Spain and the Netherlands taking 1.1 MMT each, with Belgium in third at 0.7 MMT, and the UK and Germany tying for fourth with 0.5 MMT each.

Finally, UkrAgroConsult said that Ukraine's 2015 rapeseed crop would fall 12% to 1.93 MMT this season, with exports likely to drop 15% to 1.63 MMT. They are of course a major supplier to Europe, who's own crop is likely to fall around 10-12% according to most private estimates.