Nogger's Blog

26/08/15 -- EU grains closed mixed, but mostly lower. Chinese jitters remain to the fore, with the stock market in Shanghai lower again overnight despite yesterday's stimulus measures. Shares in Europe followed suit today.

At the close, Nov 15 London wheat was down GBP0.50/tonne to GBP114.50/tonne, Sep 15 Paris wheat was EUR2.75/tonne easier at EUR162.75/tonne, Nov 15 Paris corn was down EUR1.25/tonne to EUR171.00/tonne, whilst Nov 15 Paris rapeseed was EUR3.00/tonne lower at EUR351.75onne.

The euro was a bit weaker today, meaning that support at the 1.36 level against the pound held, although some analysts are now predicting that this might not be the case for long, signalling a move down to the 1.34 area. The market appears to have completely abandoned hope of a UK interest rate rise this year, and is now questioning whether a Q1 of 2016 rise is even possible.

That could keep sterling under pressure for a while, which should help to underpin London wheat a little. We shall have to see how exports perform in the coming months to get an idea whether the harvest lows are now in, or if there's worse to come yet. The low of the calendar year was set around August/September in both 2013 and 2014.

The pace of Russia's wheat exports requires close monitoring, as these have been well behind year ago levels, despite a very similar sized crop now seeming likely.

This of course is due to the alarming slump in value of the rouble and the current export duty (and the rouble value-based mechanism that calculates it).

Some analysts are now predicting that now that NYMEX crude has fallen below $40/barrel, a test of $30/barrel could be on the cards. A further 25% drop in crude would surely give the Russian currency under even more downside.

A report by APK Inform yesterday said that Russian exporters had pretty much stopped offering wheat until the rouble finds its feet and the government clarify possible new changes to the duty.

Rusagrotrans today said that they still expect Russia to export 3.8 MMT of grains this month, falling to 3.2 MMT in September. They had previously predicted August exports of 3.7-4.0 MMT versus 4.5 MMT a year ago. Exports of 3.8 MMT seems a bit high, as that would only represent a drop of 15.5% on last year - and August 2014 exports were an all-time high.

In other news, Algeria said that it had produced a 4 MMT grain crop this year, up 14% on a year ago. They said that they aim to produce a crop of 6.7 MMT by 2019, reducing their reliance on imports. The North African nation will be the world's third largest wheat importer this season, after Egypt and Indonesia, shipping in 7.7 MMT of the grain according to USDA estimates. They are also set to import large volumes of corn (4.4 MMT) along with 600,000 MT of barley.

Tunisia released a tender for 100,000 MT of milling wheat, 159,000 MT of durum and 50,0000 MT of feed barley. France will be hoping to pick up at least some of that business. Iraq are in the market for 50,000 MT of soft wheat, although they frequently buy more than they tender for.

The fortunes of rapeseed prices seem closely tied to those of soybeans - and the latter trades at the lowest levels since 2009. "As we know, 2015/16 rapeseed supply and demand is expected to be somewhat tighter than the situation for soybeans, however the influence of the oilseeds complex as a whole has kept rapeseed prices subdued," noted the HGCA.

Front month rapeseed prices closed near EUR400/tonne on Jul 1 before closing EUR50/tonne lower than that on Monday for a decline of 12.5% in less than 2 months.