EU Grains Struggle To Hold Onto Early Gains

09/09/15 -- EU grains traded higher for a second day throughout the morning, but slipped to end mixed at the finish. Firmer stock markets were supportive. In Asia Japan’s Nikkei rose 7.7% today, Hong Kong's Hang Seng was up 4.1% and China's Shanghai Composite Index was up 2.3%. Stocks in Europe followed suit, and that seemed to add a bit of spill-over confidence into the grains sector.

By the close, Nov 15 London wheat was up GBP0.10/tonne to GBP112.00/tonne, having hit GBP113.25/tonne earlier in the day. In Paris, expiring tomorrow Sep 15 wheat closed down EUR2.00/tonne to EUR148.00/tonne, Nov 15 Paris corn was down EUR0.25/tonne to EUR363.75onne.

Nothing much has changed fundamentally, so I guess we can call the early action consolidation/bargain hunting and/or book squaring ahead of Friday's upcoming WASDE report from the USDA.

Russia's 2015 grain crop is getting bigger it would seem, and exports are also starting to gather pace helped by the weak rouble.

The Russian Ag Ministry said that this year's grain harvest is 65.6% complete on 30.8 million ha producing a crop of 78.7 MMT to date. Yields are averaging 2.56 MT/ha, down 5.9% on a year ago. Rusagrotrans yesterday raised their final crop production estimate to 102.68 MMT from 100 MMT previously.

The Russian wheat harvest is said to be 69.4% complete on 18.7 million ha producing a crop of 52.7 MMT so far. Rusagrotrans now estimate final production at 60.2 MMT which is 0.5 MMT more than last year.

The Russian barley harvest is 74.3% complete at 15.4 MMT, and the fledgling corn harvest is 8.5% complete at 1.2 MMT. Corn yields are now averaging 0.9 MT/ha more than the USDA's final forecast of 5.0 MT/ha.

Rusagrotrans said that the country exported 3.65 MMT of grains in August versus a little over 2 MMT in July, although that's still 21% less than the record 4.64 MMT shipped out in August 2014.

Wheat accounted for 81% of August exports (2.86 MMT) versus only 63% in July, but down from 91% a year previously (4.2 MMT).

Russian growers are already 32% done with planting their winter grains, say the Ag Ministry. Dryness has been a concern, but wetter than normal conditions are now in the forecast for the south at least for the coming 15 days.

In Kazakhstan meanwhile the 2015 grain harvest is 32.9% complete on 4.85 million ha producing a crop of 5.3 MMT to date. Average yields are running 5.7% up on a year ago at 1.11 MT/ha.

UkrAgroConsult said Ukraine had exported 2.2 MMT of wheat in August, almost three times the volume shipped out in July.

The HGCA reported that the UK "is near to concluding a trade protocol agreement with China following an AHDB-hosted visit by its Plant Health Inspectors in June." Essentially that means that the UK could become an "approved supplier" to China, who has been importing large volumes of French barley of late, taking 2.2 MMT from them during the 2014/15 season.

Australia was China's largest barley supplier last season, shipping in 4.9 MMT of the grain, followed by France, Canada and Ukraine.

The Chinese barley area has steadily declined to around half the size of the area planted fifteen years ago as growers switched to more profitable crops like corn and wheat, they HGCA said.

The Chinese government pay enormous premiums compared to global levels for the latter two grains to local farmers, hence their popularity.