EU Grains Mostly Higher As China Steadies The Ship

27/08/15 -- EU grains traded mostly a little higher Thursday, helped by an easing of fears over China, where the stock market closed 5% higher overnight, it's first rise of the week. Hong Kong's Hang Seng index also finished higher, up 3.6%, and European markets also trade positive.

Crude oil is up sharply too, and now trades closing above $42/barrel in New York.

Risk appetite is being boosted by the strongest jump in US equity markets since 2011 yesterday, Barclays said in a note.

At the finish, Nov 15 London wheat was up GBP0.25/tonne to GBP114.75/tonne, Sep 15 Paris wheat was up EUR0.25/tonne to EUR163.00/tonne, Nov 15 Paris corn was down EUR1.75/tonne to EUR169.25/tonne, whilst Nov 15 Paris rapeseed was up EUR7.00/tonne to EUR358.75/tonne.

Defra said that there was 71% more UK wheat carried over from old crop into the new 2015/16 marketing year at the end of June than there was a year previously. The tonnage being carried was estimated at 2.0 MMT (excluding stocks in Scotland and Northern Ireland), which is the largest volume since 2009.

The total also excludes intervention stocks and/or any wheat tendered on LIFFE.

Around half of that volume was still being held on farm, which is 260% more than a year previously, they said. The largest on farm stocks were in the East of England region, followed by the East Midlands and then Yorkshire & Humber.

The large carry that had been on offer – Nov 15 London wheat closed GBP14.25/tonne higher than the Jul 15 contract on the day that the latter went off the board – and a dissatisfaction with prices in general was clearly behind this.

There was also 780,000 MT of barley on hand at the end of last season, a 9% rise on year ago levels and the largest since at least 2007.

UK corn stocks were the highest on record at 280,000 MT, and up 47% on a year ago, they added.

Wet weather over the past week has slowed the UK harvest down, with around 55% of the combinable area now cut, up only 5 points on a week ago. The wheat harvest has only moved on from 40% done a week ago to 45% complete this time round, say the HGCA.

Their yield estimate is unchanged on a week ago at 8.3-8.6 MT/ha, up around 6-10% on the 10-year average. "Harvest progress remains behind the five year average where around 60% of the UK wheat crop was harvested by this point in August," they add.

The UK winter barley harvest is 99% done, an a quarter of the spring crop is now in. Oats are 40% done and the winter OSR harvest is 95% complete, they say. Yields are above the recent average on all except oats, which are in line with the norm at 5.7 MT/ha.

News that a strike at the port of Rouen means that the Senalia facility has suspended the loading and unloading of grains cargoes merely adds to the port's woes.

That's keeping front month Paris wheat on the defensive - the premium on offer for Dec 15 is more than EUR11/tonne today.

Heat and dryness in Ukraine means that their 2015 corn crop is likely to be closer to 25 MMT than the 26-27 MMT previously expected, say Agritel. The USDA are currently at 27 MMT, having raised that from the 26 MMT forecast in July.

APK Inform estimated the Ukraine wheat crop at 25.1 MMT in clean weight this year, up 4% on a year ago. Consumption is forecast at 12 MMT and exports at 12.5 MMT. The USDA are currently at 25.5 MMT for production and 13 MMT for exports.

MDA CropCast cut their world wheat production forecast by 1.17 MMT to 714.5 MMT, a 3 MMT drop on a year ago due to earlier dryness in Canada. Their crop was now pegged at 25.1 MMT, down 16% on 29.9 MMT a year ago.

They raised their outlook for the world barley crop by 0.47 MMT to 138.1 MMT, a 2.3 MMT decline on a year ago.

They also raised their estimate for the 2015 world rapeseed/canola crop by 0.36 MMT to 63.99 MMT, down 1.6 MMT on a year ago.

Multi-year low prices for soybeans, and soybean and palm oil mean that rapeseed "is not in control of its own price destiny right now – although the tightness in the supply of high oil yielding oilseeds is helping stem the fall in price. As and when prices begin to rise, especially if veg oil markets see a change in fortune, OSR should be one of the first to respond," said the HGCA.

Based on the market close last night, EU rapeseed prices are down almost 12% since the beginning of July, despite lower EU and world production this year.

The euro trades lower against both the US dollar and sterling today, giving rise to the notion that the recent single currency appreciation might have been a bit overdone.

The ECB desperately wants a weaker currency to stimulate Eurozone exports, so this recent strength will be unwelcome  to them.

ECB Chief Economist, Peter Praet, delivered forceful remarks yesterday that downside risks to inflation in the Eurozone had increased, which could lead to QE being "front-loaded" - and the last time this was hinted at the euro took a battering.

The euro trades at under 1.13 against the US dollar today, having attained more than 1.17 on Monday. It stands close to 1.37 versus the pound, having been less than 1.35 on Monday.

Barclays remain bearish on the outlook for the euro, forecasting the EUR/USD to drop below parity by the end of the year, and continuing to slide, hitting 0.93 by Q2 of 2016. They predict the GBP/EUR at 1.47 by the end of the year, rising to 1.52 by Q2 of 2016.