EU Grains Mostly Lower, Wheat Stocks Seen At 6-Year Highs

24/09/15 -- EU grains closed mostly lower, in a partial reversal/correction following yesterday's strong gains which pushed London and Paris wheat to one month highs.

The day ended with Nov 15 London wheat down GBP1.90/tonne to GBP113.35/tonne, Dec 15 Paris wheat was EUR2.00/tonne easier at EUR172.75/tonne, Nov 15 Paris corn rose EUR0.75/tonne to EUR163.25/tonne, whilst Nov 15 Paris rapeseed was EUR0.75/tonne lower at EUR364.25/tonne.

London wheat posted the biggest one day gain since early July yesterday, according to the HGCA, so I guess you could simply say that things got a little overdone.

Yes there are concerns over dryness in Russia and Ukraine, but these worries can't yet be quantified into anything meaningful. Winter grains plantings in both countries are only a bit behind last year's pace, although the forecast does remain dry.

To underline the fact that there's no international shortage of wheat, the IGC today raised their forecast for the global 2015/16 crop by 7 MMT from a month ago (to 727 MMT) and added another 5 MMT to world carryover stocks, taking those up to 211 MMT.

"Recent advances in wheat (prices) were partly tied to speculative short covering in US futures, as well as concerns about dry weather in some countries. Sentiment across most markets was, however, weighed by bearish fundamentals, as well as worries about the world economy and how demand for commodities might be affected," they said.

They raised their forecast for the EU-28 all wheat crop from 151.9 MMT to 155.5 MMT and versus the USDA's 154.1 MMT, now less than 0.5% below last season's record. Exports here were placed at 31.3 MMT, unchanged from a month ago and 1.2 MMT less than the USDA currently predict.

That takes EU-28 all wheat ending stocks up to 16.2 MMT from the 14.6 MMT estimated a month ago and 9.5% above the USDA's current 14.8 MMT estimate. They would also be more than 18% up compared to carryover at the end of 2014/15 and the highest since 2009/10.

Despite a 1 MMT reduction in the size of the global corn crop this month to 967 MMT, 2015/16 carryout was increased by 1 MMT due to a 2 MMT cut in consumption.

They cut their EU-28 corn production estimate from the 60.1 MMT predicted a month ago to 57.6 MMT, which is now slightly lower than the UDSA's 58 MMT, and nearly 24% down on last year's record harvest.

The total global wheat and coarse grains crop was seen 8 MMT higher than a month ago, with ending stocks up by a similar amount.

Despite some trade talk of possible frost damage to wheat in Australia, MDA CropCast today raised their forecast for this year's wheat crop there by 1.92 MMT to 25 MMT.

The Russian Ag Ministry's proposals to cut the export duty on wheat have apparently gone before the PM for final approval. If passed the new tax is expected to come into force on Oct 1. It seems that the changes proposed are favourable, which would potentially increase the nation's grain exports which are dominated by wheat.

These are currently running 22.6% down on year ago levels at 7.7 MMT Jul 1 to Sep 18.

The Russians said that their 2015 wheat harvest is 84.4% complete at 59.0 MMT. Corn harvesting is 24.3% done at 3.4 MMT and 83.6% of this year's barley area has been cut producing a crop of 17.0 MMT to date.

Ukraine said that it's 2015 grain harvest now stands at more than 40 MMT off 75% of the planned area. Corn is by far the largest crop now being harvested. That's 14% done on 566k ha, although yields are only averaging 4.4 MT/ha so far, which is well below the USDA's prediction of 6.59 MT/ha.

The Ukraine Ag Ministry estimated winter grains plantings at 33% complete on 2.46 million ha, of which 2.33 million ha is wheat. An additional 555k ha of winter OSR has been sown, although that's only 67% of the intended area and the optimal time for planting that crop is already over. Some analysts are now predicting Ukraine's 2015 rapeseed crop to be the smallest since 2007 - below even that of 2012.

On the flip side, a lower than expected Ukraine winter rapeseed area could of course lead to more wheat getting sown this year.