EU Grains Largely Give Up All Of Monday's Gains, And Then Some

11/08/15 -- EU grains pretty much staged a complete reversal of yesterday, apart from corn giving up all of Monday's gains and then some. Whilst the latter was down, it still remains the only one of the quartet to be a net gainer on the week so far.

At the close, Nov 15 London wheat was down GBP2.60/tonne to GBP119.25/tonne, Sep 15 Paris wheat was EUR4.50/tonne lower at EUR178.50/tonne, Nov 15 Paris corn fell EUR3.25/tonne to EUR185.00/tonne, whilst Nov 15 Paris rapeseed was EUR4.25/tonne easier at EUR382.50/tonne.

The big news of the day, ahead of tomorrow's all-important USDA report, was the Chinese devaluation of their currency. That hit commodity prices in general, with NYMEX crude oil falling to a new low of $43/barrel.

Wholesale downgrades to the size of this year's French corn crop mean that prices for that are still running at an unusual premium to milling wheat, although any origin corn is around a GBP15.00/tonne discount to imported French material into the East Coast of the UK, the HGCA note.

"As long as corn from other origins resists price rises, UK feed wheat may find itself held back too," they said.

Talk of bumper UK yields of barley and rapeseed this year are giving rise to the notion that wheat, the harvest of which is only just starting, could perform likelwise. That comes at a time when there's already an unusually large volume of old crop wheat being carried into the new season.

New crop feed wheat prices now aren't much better than GBP100/tonne off the combine in the South East, and barley is making little more than GBP90/tonne for immediate movement.

The market could therefore really do without a bearish surprise from the USDA tomorrow, although I fear it might get one.

Warm and dry weather now means that the pace of the 2015 Russian wheat harvest has overtaken that of a year ago.

On top of that, Rusagrotrans said that this year's corn crop there could beat last season's output by 1 MMT at 12.3 MMT, allowing for exports of around 3.5 MMT in 2015/16 versus 3.0 MMT in 2014/15.

They forecast a Russian total grain crop of 100-102 MMT this year, down only marginally on a harvest of 105.3 MMT in 2014.

Exports have been slow so far this new season though, held back by the new duty on wheat which is linked to the value of the rouble.

ProZerno said that Russia only exported 2 MMT of grain in July, down 34% versus the same month in 2014. Of that, only 1.28 MMT was wheat, down sharply on 2.67 MMT a year ago and over 2 MMT in 2013.

The top wheat buyer last month was Iran (192 TMT) followed by Turkey (175 TMT) and then Egypt (175 TMT).

Russian wheat exports should pick up if and when the government make changes to the export duty, moves to do that are in the offing.

Other news out of Russia today was that the government there are to delay the start of this season's intervention purchasing programme (which was scheduled to start today) by a week. No explanation was given as to why this was the case.

Regardless, the prices on offer are pretty poor, so sales into the fund for the time being are likely to be minimal.

APK Inform estimated Ukraine's grain consumption to fall 5% this season to 27.3 MMT. Domestic wheat usage will drop 0.5% to 12 MMT, with barley and corn consumption both down 8.5% to 4.4 MMT and 9.1 MMT respectively.

The country is estimated to produce around 26 MMT of wheat, over 8 MMT of barley and 24 MMT of corn this year, leaving plenty left over for export.