EU Grains Jump On Heat, Dryness, Crop Downgrades

16/07/15 -- EU grains closed higher, although fairly well off the intra-day highs, reversing most of yesterday's losses.

At the close Nov 15 London wheat was up GBP1.25/tonne to GBP127.00/tonne, Sep 15 Paris wheat was EUR3.25/tonne higher at EUR194.50/tonne, Aug 15 Paris corn was up EUR3.75/tonne to EUR182.50/tonne, whilst Aug 15 Paris rapeseed was EUR2.75/tonne firmer at EUR387.75/tonne.

Another round of very warm weather is on the cards from France this week, with temperatures forecast to hit 40C in some parts of the country today. Rapid harvest progress should have been made there when FranceAgriMer report on that tomorrow. The heat could certainly now be causing some problems for pollinating corn.

Strategie Grains cut their forecast for the EU-28 soft wheat crop from 141.6 MMT to 140.9 MMT, having already knocked a million tonnes off last month's estimate due to heat and dryness issues. They also trimmed their EU corn production estimate by 0.8 MMT to 66.7 MMT.

French markets are supported by the ever weakening euro, as traders keep an eye on developments in Greece, who have apparently been granted an EUR7 billion bridging loan to keep their finances afloat until their bailout is arranged.

Comments from the IMF that the country can obtain debt sustainability only through extensive debt relief that is "far beyond what Europe has been willing to consider so far" hardly inspires confidence, and look like keeping the euro under pressure for some time yet.

The pound is up to its best level against the single currency since November 2007 today, also helped by the news from yesterday that wage growth in the UK accelerated at the fastest pace in 5 years in the last quarter.

Barclays predict the euro falling to 69 pence by the end of the year (although it's looking like it might get there a lot sooner than that to me), and 68 pence in Q1 of 2016. It will also slip to parity with the US dollar, and then below it to 0.98 in the same two periods, they say.

That should continue to support the grain markets on the continent relative to those in the UK, although it would also be a bit more friendly for UK wheat than it would be for US material, which is already struggling to compete on the export market.

It is also something to bear in mind for those growers in the UK relying on the Single Farm Payment System to bail them out later this year.

Better than expected harvest results keep being reported out of Russia. The Ag Ministry there say that the 2015 harvest is now 10.1% complete on 4.7 million ha, a million ha less than this time last year. Production currently stands at 17.6 MMT versus 20.1 MMT a year ago. Yields are reportedly averaging 3.74 MT/ha, up 5% on a year ago.

Wheat accounts for 3.2 million ha of the area harvested, or 12% of plan, producing 12.1 MMT with an average yield of 3.78 MT/ha versus 3.62 MT/ha in 2014 at this stage.

The Southern District is 34.3% harvested and the North Caucasus region is 46.7% done, they say.

The Ukraine State Stats Service said that the country's Jul 1 grain stocks were up 12.9% on a year ago at 7.9 MMT, despite record exports in 2014/15. That included 3.2 MMT of wheat, 1.5 MMT of barley and 2.9 MMT of corn.

They've hit the ground running with exports in the new 2015/16 season, and these extra carryover stocks will stand them in good stead to continue in that vein at least through to Christmas.

Morocco said that they'd bought 175,000 MT of wheat on the domestic market for their state-subsidised bread programme.