EU Grains Fail To Resist Negative Pull Of US Wheat

30/04/15 -- EU grains traded mostly higher in morning trade, continuing to consolidate recent losses. The French markets are closed tomorrow, so we maybe also saw a bit of early book-squaring and profit-taking ahead of the long weekend.

That all changed in afternoon trade though, when US markets opened amid the news from the USDA that US weekly export sales of wheat last week were the worst on record, and Chicago wheat subsequently slumped to new 5-year lows, dragging EU markets lower with it.

The session ended with May 15 London wheat officially down GBP0.10/tonne at GBP111.90/tonne, May 15 Paris wheat was EUR0.25/tonne easier at EUR178.00/tonne, Jun 15 Paris corn fell EUR0.75/tonne to EUR157.00/tonne and new front month Aug 15 Paris rapeseed sank EUR12.75/tonne to close at EUR343.75/tonne.

New crop Nov 15 London wheat fell GBP1.75/tonne to close at GBP119.55/tonne (and close to the lifetime contract low of GBP119.00/tonne set last September), narrowing the premium it now commands over old crop May 15 to GBP7.65/tonne. New crop Dec 15 Paris wheat closed at a one euro discount to May 15.

The pound rose close to 1.55 against the US dollar today, and is up more than 5% against the US currency in the past 3 weeks, on signs that the US economy is slowing. US growth in Q1 of 2015 was just 0.2%, down sharply from 2.2% in the final quarter of 2014, and well below analyst's estimates of a gain of around 1%. That puts thoughts of a US interest rate rise any time soon well onto the back burner.

Thoughts are now firmly fixed on spring planting and new crop production prospects in the northern hemisphere.

In the UK, "April was mainly dry with below average rainfall which allowed good progress to be made with spring drilling, with almost all spring barley drilled and spring oats drilled by the end of the month," said the HGCA.

They estimated that spring wheat planting is around 90% complete, along with about half of the spring OSR crop. Spring barley and oats are estimated at 95% planted.

Crop growth stages remain around ‘normal’ for the time of year, and winter grains are generally in good condition going into May, they said.

"Positive new crop prospects, along with increased pressure from the expectation of a substantial carryover of stocks, are weighing down global and national prices," they noted.

MDA CropCast estimated the EU-28 wheat crop at 143.1 MMT, unchanged from a week ago and 4.4% down on last year. They see the average EU yield at 5.67 MT/ha, slightly lower than the 5.89 MT/ha predicted by MARS earlier in the week.

They lowered their estimate for the EU-28 corn crop by 0.2 MMT to 62 MMT, a near 9% decline compared to a year ago. They have the EU barley crop unchanged from last week at 56.4 MMT versus 57.6 MMT last year.

They continue to be out on a limb with their forecast for the EU rapeseed crop in 2015, pegging that at a large looking 24.56 MMT, up 6.5% on last year - and indeed a new record! Most other analysts are lining up around the 21.5 MMT mark.

Decent rains in France are seen improving crop conditions there. With 91% of the winter wheat crop already rated good to very good, and plantings seen at the largest since 1936, they are surely in for a record crop in 2015?

Plantings are slow in Russia and Ukraine. How much of this is down to the wet weather that they have been experiencing lately - or if it could it simply be that lack of cash means that official area estimates are too high - remains to be seen.

Ukraine's spring corn crop is 37% sown on 1.7 million ha compared to the 2.4 million that had been planted at this stage a year ago. Sunflowers are 42% planted on 1.8 million ha, which is 1 million less than a year ago.

As reported yesterday, Russian sowings are similarly retarded.