EU Grains End Lower In Fallout Following USDA Report

11/06/15 -- EU grains closed mostly lower in the continued fallout from last night's bearishly construed USDA report.

At the close Jul 15 London wheat was down GBP2.60/tonne at GBP115.60/tonne, Sep 15 Paris was EUR3.25/tonne weaker at EUR180.25/tonne, Aug 15 Paris corn was down EUR1.00/tonne at EUR163.25/tonne, whilst Aug 15 Paris rapeseed fell EUR0.75/tonne lower to close at EUR370.25/tonne.

New crop Nov 15 London wheat had rallied 10.6% from the mid-May low when it peaked at GBP130/tonne yesterday morning. "The early June rally in UK feed wheat futures brought the Nov 15 contract almost within GBP2/tonne of the post-planting average," said the HGCA today. "However, futures prices fell once again yesterday, mirroring events in March when prices last approached the average but failed to break through," they noted.

Going through the minutiae of last night's USDA report, we see that they increased their forecast for this year's EU wheat yields from 5.66 MT/ha to 5.69 MT/ha. Although they trimmed back their planting estimate from 24.56 million ha to 24.50 million, that still takes production up by around 400 TMT to 150.7 MMT.

Conditions in May were favourably wet in France and the UK, slightly unfavourably dry in central Europe, and unfavourably hot and dry in Spain. NDVI and weather analysis, as well as positive local reports, have led to a production increase of 1 MMT in France and 0.5 MMT in the UK, they said.

Russia's wheat crop was raised by 1.5 MMT to 55 MMT. Yields were forecast at 2.18 MT/ha, up 2% from last month, although still down 13% from a year ago.

"Winter wheat in the key Southern District benefited from precipitation in May and early June, especially in the northern half of the district where winter crops were in poor condition earlier in the spring," they said.

"Crop vigour remains generally poor in the Central District, where satellite-derived vegetation indices indicate that Winter wheat has not satisfactorily recovered from the severe fall dryness that hampered crop emergence and establishment," they added.

Ukraine's 2015 wheat production potential was increased 1 MMT to 23 MMT. The harvested area was estimated at 6.8 million ha against 6.3 million last year. Yield was forecast at 3.38 MT/ha, up 3% from last month, but still down 14% from last year.

"Severe dryness hampered winter-wheat emergence and establishment last fall, and crop conditions were extremely poor when Winter wheat resumed vegetative growth in March. Winter wheat yield prospects improved significantly following beneficial rain in April and May although some territories still show evidence of dryness," they said.

They pared back their forecast for EU corn plantings, and estimated EU barley yields a tad lower than a month ago. Both of which led to small reductions in projected production for each this year compared to a month ago.

EU rapeseed production this year was raised 0.5 MMT to 22.1 MMT. That came courtesy of yields being estimated at 3.37 MT/ha, up 2.1% from last month, although still down 6.1% from last year’s record.

"The estimate for EU rapeseed was raised because of favourable spring weather in the major growing areas of northern Europe and minimal insect damage," they noted.

A Thompson Reuters crop tour of France moved on from the northern Picardie region to the centre of the country and Burgundy. Here they found that "conditions have deteriorated since mid-spring and the crops need rain" - without which losses could reach 15%, they said.

In Dijon, rain hasn't fallen in over a month, reducing yield potential, they say. EU restrictions on fertiliser and pesticide usage are also having a negative impact on protein levels in wheat, and some fairly widespread flea beetle damage is evident in rapeseed crops in the area, they added.

In other news, in the first 10 months of 2014/15 the UK imported 1.734 MMT of corn, said the HGCA. That's a 24% decrease on a year ago. France at just over 600 TMT was the leading supplier, although around 200 TMT each came from Romania and Ukraine, followed by over 150 TMT from Argentina.

Egypt's GASC tested the water today with a tender for wheat for Jul 11-20 shipment. Despite talk that Russian exporters are reluctant to commit to forward sales because the new Jul 1 export tax on wheat is linked to the value of the rouble, which after its recent decline in value increases the chances of being levied at more than the minimum RUB50/tonne (around one US dollar), Russian origin accounted for 7 of the 12 offers made. It was also priced the lowest in the winning bid from Louis Dreyfus ($190.50 FOB) which again came in below $200/tonne including freight.

The next cheapest offer after that was Romanian wheat at $193.67/tonne FOB, with the rest of the Russian offers in the $195-203/tonne region. The only French offer was $213.67/tonne, and US material was priced even further out at $227.67/tonne.