EU Grains End Mostly Higher, With Rapeseed At 14-Month Highs

24/06/15 -- EU grains closed the day mostly higher, with Jul 15 London wheat up GBP0.65/tonne at GBP110.65/tonne, Sep 15 Paris wheat was EUR0.25/tonne lower at EUR184.25/tonne, Aug 15 Paris corn was up EUR2.75/tonne at EUR167.00/tonne, whilst Aug 15 Paris rapeseed closed EUR2.00/tonne higher at EUR383.50/tonne.

For rapeseed this was the highest close on a front month since April 2014.

Oil World have trimmed back their estimate for the EU rapeseed crop by 200,000 MT to 21.8 MMT, down 10.5% on last year's production of 24.36 MMT.

They see plantings for the 2015 harvest down 3%, with yields dropping 8% to 3.33 MT/ha. The latter figure is still above the 3.28 MT/ha average suggested by the EU Commission's MARS unit on Monday. The MARS estimate would potentially cut production to below 21.5 MMT this year.

Oil World now see the German rapeseed crop down 16.8% on a year ago to 5.1 MMT, a fall of more than 1 MMT compared to last year's record.

Production in France is estimated 5.8% lower at 5.2 MMT, and Poland's crop will decline 8.2% to 2.9 MMT, they predict.

They forecast the UK rapeseed crop to fall 7.8% this year to 2.27 MMT versus their figure of 2.46 MMT for output in 2014.

There's some debate in the trade at home whether the old crop tightness seen at the end of the current season is possibly due to 2014 rapeseed production having been overestimated. With more than a GBP30/tonne premium on offer for old crop supplies over new crop, and few if any takers, that would suggest that the old crop supplies aren't really there in any volume.

Thus it would seem that UK carryover stocks into the new season will only be minimal.

The reduction in EU production this year, in contrast to good availability of soybeans, with see rapeseed command a "sizeable" premium over soybeans throughout the 2015/16 season, say Oil World.

Ukraine said that they'd now exported 33.9 MMT of grains this season, including 18.4 MMT of corn, 10.8 MMT of wheat and 4.5 MMT of barley.

Rusagrotrans said that Russia's grain exports in July would double those of June at 2.8 MMT, rising to 3.8 MMT in August as new crop material comes onto the market.

Those numbers are still some way below exports in the same period in 2014 (July 3.12 MMT and August a record 4.64 MMT) due to the fact that exporters were slow to commit to making new crop sales this year due to the on/off imposition of export duties and rouble volatility, they said.

They estimated Russia's 2015/16 full season grain exports at 31.7 MMT, including 22.1 MMT of wheat, 5.2 MMT of barley and 3.0 MMT of corn. These numbers include shipments to Kazakhstan which aren't included in official government data.

The market doesn't yet seem to be factoring in that large scale US wheat quality downgrades this year probably mean more feed grade material coming onto the market, judging by the fact that US corn prices followed wheat higher last night.

The large premium on offer for old crop UK rapeseed over new crop, aren't at all reflected in the domestic wheat market. In fact quite the opposite, with Jul 15 London wheat at a near GBP15/tonne discount to new crop Nov 15.

That won't be encouraging many to sell on the spot market, having carried their old crop this far, provided of course that they don't desperately need the space (or cash) ahead of the start of harvest 2015.

That likely means that there will be an unusually large volume of last year's production getting carried into 2015/16, continuing to weigh on the market - especially given that current sterling strength will make finding export homes a challenge once again in the new season ahead.