EU Grains Mixed As Trade Digests USDA Numbers
12/05/15 -- EU grains closed mixed, but mostly with little change, save for rapeseed which closed with losses of around EUR2.00-4.00/tonne.
The day ended with May 15 London wheat up GBP0.50/tonne at GBP107.35/tonne, Sep 15 Paris wheat was unchanged at EUR173.50/tonne, Jun 15 Paris corn was down EUR1.25/tonne at EUR155.00/tonne and Aug 15 Paris rapeseed was down EUR2.75/tonne at EUR356.25/tonne.
It was a big day in terms of news, with the USDA giving us their first take of the season on crop production and demand prospects for the year that lies ahead.
Before we move onto that though, it is worth noting that they increased the size of EU wheat exports in the current 2014/15 season by 1 MMT to a new record 34.5 MMT. That helped to cut ending stocks here from the previously forecast 15.3 MMT to 14.7 MMT. Also of note with regards to the current season were increases in exports for Russia, up from 20 MMT to 21.5 MMT, and Ukraine, up from 11 MMT to 11.5 MMT. Argentina and the US had their export potential pared back by 0.5 MMT and 0.8 MMT respectively.
Looking ahead, world 2015/16 wheat production was forecast down from last year’s record, but still above consumption for the third straight year. They see output in the season ahead at 718.9 MMT, down 1% from 726.5 MMT a year ago, with consumption rising to 716.6 MMT.
They see production in Europe down 4% at 150.3 MMT this year, with exports falling 2 MMT to 32.5 MMT and ending stocks falling a little to 14.0 MMT in 2015/16.
Russia's wheat crop is forecast at 53.5 MMT this year, down 9.5% on a year ago. Following poor establishment after a dry autumn, "winter crops benefited from generous April precipitation, and early May satellite imagery reflect substantial improvement in many territories in the Central District and Volga Valley. Potential yields will depend in large part on May and June weather. Winter wheat accounts for about two-thirds of Russia’s total wheat output," they said.
"Sharp increases in the prices of fertilizer and imported agrochemicals will induce some farmers to reduce fertilizer application rates and switch to cheaper but less effective domestic chemicals. Many enterprises, however, enjoyed high profits from last year’s bumper harvest, which enabled them to purchase inputs last fall. Most independent commodity analysts do not envision a large year-to-year drop in the use of these materials," they added.
They forecast wheat production in Ukraine this year down 11% at 22 MMT.
In the 2015/16 season, their first estimate for Russia's wheat exports is 1.5 MMT less than this marketing year at 20 MMT. Ukraine's exports will drop 1 MMT to 10.5 MMT, they predict.
The EU-28 corn crop will drop more than 7% to 68.3 MMT, and imports of the grain in 2015/16 will therefore jump 50% from 8 MMT to 12 MMT, they said.
As far as barley is concerned, EU-28 exports for the current season were raised 1 MMT to 8.5 MMT, but will fall to 7.5 MMT in 2015/16. Production here this year will decline 2.5% to 58.7 MMT, they estimate.
Rapeseed production in Europe will fall nearly 11% to 21.6 MMT, they added. Separately, Oil World today raised their outlook on rapeseed production in the EU this year to 22 MMT. This 21.5 to 22 MMT is the region where most analysts are now lining up.
At home, the pound hit its best levels against the US dollar since November. Although the BoE appear to be under little pressure to raise interest rates any time soon, there's a school of thought that suggests that the recent Tory election victory, without the need to form a coalition, offers the stability that affords them the option to do so possibly a bit sooner than expected.
That won't help wheat UK exports any. These fell to 237 TMT in March, down 11% compared to February which was also of course also a shorter month. Season to date exports are 1.58 MMT out of the Defra estimate of an exportable surplus/free stock figure of almost 3.9 MMT in a season with only 3 months left to go. It is also worth noting that wheat imports in March increased to 128 TMT, and that season to date imports aren't much less than exports at 1.27 MMT.
UK barley exports in March were 183 TMT, taking the season to date total to 1.16 MMT - said to be the highest at that stage in a season in 15 years by the HGCA.
