EU Wheat Little Changed On The Week, But Corn And Rapeseed Post Decent Gains

07/08/15 -- EU grains closed mixed on the day. Wheat was little changed for the week, but corn and rapeseed posted some decent gains on sharply lower production concerns.

At the close Nov 15 London wheat was GBP0.95/tonne higher at GBP119.95/tonne, Sep 15 Paris wheat was down EUR0.50/tonne at EUR179.75/tonne, Aug 15 Paris corn was EUR1.50/tonne higher at EUR183.50/tonne, whilst Aug 15 Paris rapeseed was up EUR1.25/tonne at EUR384.00/tonne.

For the week, London wheat added the princely sum of 10 pence, Paris wheat was 75 cents easier, corn jumped EUR9.50/tonne and rapeseed advanced EUR6.75/tonne.

EU corn production estimates are dropping like stones. France had the 3rd hottest July since 1900, Bloomberg report, with average temperatures 3.6F above normal. Rainfall on average was also more than 40% below normal, they add.

"Summer drought and abnormally hot temperatures have taken a severe toll on the corn crop, which is currently pollinating and filling grain," said Martell Crop Projections.

"After the biggest European corn harvest on record last season, 75 million tonnes, production is set to plunge. New crop corn is expected to make 62.8 million tonnes, based on the median estimate from 8 analysts and traders in a recent Bloomberg survey," they added.

FranceAgriMer today lowered the proportion of the French corn crop rated good to very good by one point from a week ago to 58%. That's down from 85% in mid-June and also this time a year ago.

EU rapeseed production is also expected to tumble this year, from around 24.3 MMT to 21 MMT or less, on a combination of reduced plantings and lower yields.

That's providing support for those two markets, with French corn now running at a premium to milling wheat for the first time in 2-years. It's also noticeable that the price differential between French and US corn has also widened significantly. "As at 13 July the price gap between the two contracts was GBP19.42/tonne and has since increased to GBP31.13/tonne (as at 6 August)," the HGCA pointed out.

The hot and dry weather that's ravaged the French corn crop appears to have come too late to have much of a negative impact on wheat production though, with a record crop now expected.

Harvesting of that was 86% complete as of Monday night, say FranceAgriMer, up from 71% done a week previously and one point ahead of this time last year. Quality is said to be much more consistent than last year. Even spring barley harvesting is now 92% complete, up from 75% a week ago and versus 84% this time last year.

Final data for the 2014/15 marketing year from the French Ministry shows that soft wheat exports last season rose 1.5% to a 4-year high of 19.3 MMT. Exports to Egypt trebled to 2.14 MMT, although shipments to "traditional" homes such as Algeria (-45%) and Morocco (-36%) were sharply lower.

French barley exports in 2014/15 jumped 31% to 6.6 MMT, aided by huge new interest from China who took almost 3 MMT in the recently ended season, up massively from only 102,000 MT in the previous campaign.

At home, the UK barley harvest was 50% done as of August 4, say the HGCA. It's estimated to be 95% complete in both the South East and South West and 80% complete in the Eastern region. "Grain quality is good with high specific weights, low grain nitrogen and low levels of screenings," they say.

They do point out that quality data is skewed in favour of samples from the south, as this is where the harvest is most advanced, but so far estimate average yields at 7.1-7.3 MT/ha versus the 10-year average of only 6.5 MT/ha.

The estimate the UK winter OSR harvest to be 35% complete nationally. "The majority of crops look clean, with low levels of lodging and pod shatter," they say. Average yields are estimated at 3.5-3.7 MT/ha versus the 10-year average of 3.4 MT/ha, with oil content around 43-46%.

Only small areas of winter wheat and spring barley have so far been cut, they add.

Look for choppy trade next week, with the USDA's August WASDE report due out on Wednesday.