EU Grains Trade Mostly Lower, But Is Worse Still To Come?

27/05/15 -- EU grains closed mostly lower, as the 2015 harvest draws ever nearer.

At the finish Jul 15 London wheat was down GBP0.70/tonne at GBP109.90/tonne, Sep 15 Paris wheat was EUR2.25/tonne easier at EUR178.75/tonne, Jun 15 Paris corn was up EUR1.00/tonne at EUR153.75/tonne whilst Aug 15 Paris rapeseed was down EUR1.00/tonne to close at EUR362.00/tonne.

Crop production prospects in Europe are improving. France is experiencing "exceptionally good conditions" and in the UK and Germany the outlook is "favourable" MARS reported yesterday.

At home "end-of-April rains were particularly welcomed in the southern UK, where soil water levels were close to critical for winter crops and dry top soils were hampering the emergence and early development of spring crops," they said.

The only two major crop producing areas of Europe that are a concern are in Spain (Andalucia) and Italy (Puglia), mainly due to water scarcity, they added.

Yields of wheat, barley, corn and rapeseed are all seen significantly above the 5-year average, if a little below last year's "bumper" levels.

The rash of short-covering that we saw mid-month that was triggered by heavy rains on the US Plains appears now to have given way to fresh selling. Fund money was estimated to have been a net seller in Chicago wheat of more than 10,000 contracts last night.

History suggests that the lows of the year are still ahead of us. For Chicago wheat, in each of the last five years the earliest low of the year has only occurred in May once, all the other lows have been later. In the case of London wheat, the low of 2010 came in May, in 2011 it was June (followed by an even lower low in Nov/Dec), in 2012 it bucked the trend and fell in January, in 2013 it was August and in 2014 it was September.

Rusagrotrans said that Russia's wheat exports have more than doubled since they cut the export duty on the grain on May 15. The country has shipped out 434 TMT of wheat in the 10 days to May 26 versus only 208 TMT in the same period in April. Wheat's share of the grain export market at Russia's deep sea ports has thus risen from 34% to 56%, with that of barley down from 24% to 13% and corn falling from 42% to 31%, they said.

They now forecast Russia's 2014/15 total grain exports at close to 30 MMT, including 22 MMT of wheat.

The Russian analysts also forecast the country's 2014/15 grain ending stocks at 14.8 MMT, plus a further 2 MMT in intervention.

Russia said that they'd picked up around 34 TMT of grain at today's intervention purchase round, taking the total volume bought so far to almost 982 TMT.

The Russian Ag Ministry said that the country had now planted almost 75% of the intended spring grains area, with wheat sowings past three quarters done on 8.9 million ha, barley plantings are past 80% done on 6.7 million ha and those for corn are now north of 90% complete on 2.5 million ha.

The weather from hereon in is now the next thing to watch. Whilst the weather in Southern Russia is currently hot and dry, temperatures are forecast to peak at above 30°C on Friday, before falling back. Above average rains are also in the 15 day forecasts for most of the region too.

Plantings in Kazakhstan meanwhile are badly delayed by heavy rains. These have totalled 3-4 times the national average in the May 10-20 period, according to the Kazakh Weather Service.