Nogger's Blog

28/05/15 -- EU grains closed mostly higher. The day ended with Jul 15 London wheat up GBP0.60/tonne at GBP110.50/tonne, Sep 15 Paris wheat was EUR0.25/tonne higher at EUR179.00/tonne, Jun 15 Paris corn was up EUR0.75/tonne at EUR154.50/tonne and Aug 15 Paris rapeseed rose EUR0.50/tonne to EUR362.50/tonne.

London wheat got support from a weaker sterling, which fell below key support at 1.5330 against the US dollar, and also dipped back below 1.40 versus the euro for the first time in a week.

Barclays retain their very bearish outlook on the GBP/USD exchange rate, forecasting cable at 1.42 by the end of the year. Lloyds are much more optimistic, suggesting 1.54 in Q4 of 2015.

Both are singing from the same song sheet as far as the GBP/EUR is concerned though, estimating a rate of 1.45 in Q4 of 2015. Not to be outdone, Danske Bank also agree entirely with that assessment.

The latter forecast UK base rates, stuck on hold at 0.5% for six years now, to rise in November of this year. They don't see rates rising very dramatically though, suggesting that 1.5% is where we might be at the end of 2016. Lloyds have a similar view, forecasting a quarter point rise in Q4 of this year, followed by a further half point rise in the course of 2016, taking rates at the end of next year to 1.25%.

With "the experts" seemingly pretty much in unison on GBP/EUR prospects, then that would support continental grain prices relative to those in the UK in the coming months. If Barclays are right about the GBP/USD then at least we could say that this would support UK prices relative to those in the US, and it would also potentially make dollar denominated protein imports more expensive.

In other news, private analysts in Russia don't agree with the official Ministry bullish rhetoric concerning crop production prospects there this year. SovEcon are forecasting a Russian grain crop of 95 MMT in 2015, down around 10 MMT on a year ago, and 5 MMT below the current Ministry estimate. Note to that the Ag Minister himself is now suggesting that output at similar levels to a year ago could ultimately be achieved in 2015. It's difficult to see how given all the various problems, notwithstanding the weather, that growers there have faced, and continue to face.

"In the key wheat growing southern district growing conditions have deteriorated with hot, dry weather in the past 2 weeks. Temperatures peaked May 26th at 32-35 C (90-95 F). Just scanty rainfall has occurred with hit-or-miss showers. If the dryness persists, wheat prospects would rapidly decline, as the store of ground moisture is running out," said Martell Crop Projections.

The Russian Grain Union predict a domestic wheat crop of 55 MMT this year versus 60 MMT in 2014. SovEcon are currently at 54 MMT and the USDA at 53.5 MMT. The RGU say that total grain exports in 2014/15 will total around 21 MMT, but could fall to 15-17 MMT in the season ahead due to the introduction of a new "floating" duty on wheat exports. SovEcon estimate next season's wheat exports at 18 MMT.

The Ukraine Ag Ministry said that spring planting there is almost over at 98% complete on 6.9 million ha, a total which includes 4.2 million ha of corn. They've also sown an additional 4.56 million ha of sunflower and 1.9 million ha of soybeans. The country has exported almost 32 MMT of grains so far this season, and that could rise to around 33 MMT by the end of the current campaign, they added.

The Ukraine Hydromet Centre say that 7.6% of winter grains are in excellent condition, with 74.5% rated good and 17.8% satisfactory. They estimate Ukraine winter grain production at 25-27 MMT this year, and see winter wheat yields averaging 3.6 MT/ha and those of winter barley at 2.8 MT/ha. MARS put Ukraine all wheat yields (although very little spring wheat is grown) at 3.45 MT/ha earlier in the week, and pegged all barley (winter and spring) yields at 2.63 MT/ha.

MDA CropCast today raised their view on Ukraine's wheat crop in 2015 by 0.33 MMT to 21.9 MMT, but still a 10% fall compared with a year ago. They cut their outlook on Europe by 0.2 MMT to 142.9 MMT, down 4.5% versus last year. They held steady on EU corn production prospects at 62 MMT, down 8.8%, and were also unchanged on barley output in the EU at 56.4 MMT, a 2.1% decline year-on-year. They see Russia's 2015 wheat crop incidentally a bit lower than the RGU or SovEcon at 52.8 MMT, a 9.1% fall compared to 2014.

The Russian Ministry said that spring grain plantings there are now 77.1% complete on 23.9 million ha versus 26.0 million ha a year ago. Wheat is 70.5% done on 9.3 million ha (10.4 million a year ago), barley is 82.8% done and 91% of the 2015 corn crop is in, they say.

Egypt's GASC bought 240 TMT of wheat for Jul 1-10 delivery in their tender today, comprising one cargo of Romanian at $199.20 C&F, along with 3 cargoes of Russian material, two at $199.22 C&F and the other at $199.50 C&F. Only one cargo of French was offered, and that was at $198.94/tonne FOB before more expensive freight was added on.

Reuters said that the recently reported 450 TMT of wheat purchased by Algeria on the international market for August delivery was in fact 540 TMT. The tonnage is believed to be mostly French origin.