EU Grains Post Solid Gains In High Volume Trade

26/06/15 -- EU grains closed with solid gains on the day, and for the week. A combination of sharply higher US markets, deteriorating EU weather conditions and the weak euro in the face of the as yet failure to reach an accord with Greece, were all supportive today.

At the close Jul 15 London wheat was up GBP3.75/tonne to GBP114.80/tonne, Nov 15 was EUR3.25/tonne higher at GBP128.80/tonne, Sep 15 Paris wheat jumped EUR8.75/tonne higher to EUR194.25/tonne, Aug 15 Paris corn was up EUR4.50/tonne at EUR173.50/tonne, whilst Aug 15 Paris rapeseed climbed EUR3.75/tonne to EUR391.25/tonne.

For the week, Jul 15 London wheat gained GBP3.80/tonne, or 3.4%, and Nov 15 rose GBP6.30/tonne, or 5.1%. Sep 15 Paris wheat meanwhile closed the week EUR15.75/tonne higher than it began it, for a net weekly gain of 8.8%. Aug 15 corn added EUR11.75/tonne, or 7.3%, during the course of the week and Aug 15 Paris rapeseed rose EUR12.00/tonne, or 3.2%.

New crop Nov 15 London wheat posted a GBP4.50/tonne trading range today, and traded as high as GBP131.00/tonne at one stage, it's best levels since early April - but was only able to hold onto some of those advances at the finish. Well over 1,000 lots of the benchmark contract changed hands during the session.

The most active Dec 15 Paris wheat contract meanwhile managed to settle just half a euro off the session high of EUR196.50/tonne, up EUR8.25/tonne on the day, with over 162k lots traded.

A very hot and dry forecast for much of Europe next week and beyond, plus a continuing over-wet outlook for US grains in the Midwest, has sent market shorts scrambling to cover in some of their exposure this week.

Much of Europe is set to swelter under temperatures as much as 10C higher than normal over the next two weeks, with rainfall totals also generally set to remain light.

FranceAgriMer today cut the proportion of the French winter wheat crop rated good to very good by four percentage points to 81%. Some 23% of the French crop is now officially rated in the highest "very good" category, down from 36% at the end of May. The heat and dryness is clearly affecting wheat more than the more mature winter barley crop, for which good to very good ratings were left unchanged at 85%. Spring barley was cut to 79% good to very good from 82% a week ago, and corn was pegged at 83% in the top two categories versus 85% a week ago.

It's far from a disaster just yet, but it warrants attention, and if the current forecast verifies then further downgrades look likely over the next couple of weeks.

The 2015 French winter barley harvest is 4% done nationally, with the Poitou-Charentes region 15% done, followed by 11% of the crop in the Centre region. Around 3% if the 2015 French winter wheat crop has been cut in the Midi Pyrenees area of the country, they said, although the rest of the country is still to start.

Spanish production hopes meanwhile have gone downhill rapidly this month. Cooperativas Agro-Alimentarias pegged soft wheat output there this year down 14% at 4.92 MMT. That number is all the more startling when you consider that in May they were predicting production to rise 31% to 7.53 MMT, say Bloomberg.

The outlook for the Spanish soft-wheat crop in Castilia and Leon, the two largest growing regions, was cut to 2.27 MMT from the 3.71 MMT predicted in May, they said.

This year's Spanish corn crop is now estimated to decline 8.8% to 4.27 MMT, barley production this year is still seen rising 1.1% year-on-year to 6.69 MMT they were calling that crop as high as 8.44 MMT only a month ago.

Temperatures may near 100F (38C) in corn areas in southern France in the second half of next week, a senior meteorologist at AccuWeather told Bloomberg. The south east of the UK meanwhile could also see the mercury rise as high as 35C, next Wednesday/Thursday, some are predicting.

UK production prospects still look good, although some cereal crops on light land have started to show visual symptoms of moisture stress, said the HGCA.

Coceral today estimated the EU-28 soft wheat crop down 5.2% on last year at 140.62 MMT, with all wheat production down 4.9% at 148.22 MMT. The EU-28 barley crop was pegged down 5.8% at 56.68 MMT, with corn production seen falling 11% to 65.74 MMT. EU rapeseed production this year was forecast 11.3% lower at 21.38 MMT.

Coceral have the UK wheat crop at 14.96 MMT, down 9.4% on last year, with yields averaging 8.0 MT/ha versus 8.55 MT/ha a year ago. The UK barley crop is estimated at 6.66 MMT, down 5%, and the UK rapeseed crop was forecast at 2.27 MMT, down 9.6% compared to 2014.

In Germany, another country that has been affected by heat and dryness, soft wheat production this year was called 10.5% lower at 24.89 MMT, with barley output down 13.2% at 10.12 MMT and the rapeseed crop down 19.2% at 5.06 MMT.

In other news, Brussels granted 361 TMT worth of soft wheat export licences this week, taking the total for the season to 31 MMT, up almost 12% versus 27.7 MMT a year ago.