EU Grains Universally Lower On The Week, With Big Crops Getting Bigger

04/09/15 -- EU grains closed mixed on the day, but universally lower for the week.

At the finish, Nov 15 London wheat was up GBP0.30/tonne to GBP111.00/tonne, Sep 15 Paris wheat was up EUR1.00/tonne to EUR147.75/tonne, Nov 15 Paris corn was down EUR0.75/tonne to EUR161.50/tonne, whilst Nov 15 Paris rapeseed was down EUR2.00/tonne to EUR357.25/tonne.

For the week, Nov 15 London wheat shed GBP2.65/tonne, whilst Sep 15 Paris wheat lost a massive EUR15/tonne, or more than 9% of its value compared to last Friday. Dec 15 Paris wheat was down a more modest EUR6.75/tonne on the week, and was unchanged today having earlier set a new lifetime contract low of EUR164.25/tonne. Nov 15 Paris corn was EUR7.50/tonne easier on the week and Nov 15 rapeseed fell EUR7.25/tonne from last Friday.

The French Farm Ministry raised their estimate for this year's soft wheat crop there to an all-time high 40.8 MMT, which would easily beat the previous 1998 record of 38.2 MMT.

They also increased their forecasts for the 2015 French corn and rapeseed crops, with the former up from 13.2 MMT to 13.5 MMT and the latter revised higher from 5.0 MMT to 5.3 MMT.

The size of this year's wheat crop is weighing on the market, with silo operators in Dunkirk and Rouen reportedly full and suspending the intake of wheat until some progress is made with exports.

The news then that Brussels only issued 190 TMT worth of soft wheat export licences this week was a huge disappointment. That's the lowest weekly total of the season so far, and 31% lower than last week's total.

France did at least account for 63% of that 190 TMT, although yesterday's news that Egypt bought Russian wheat, despite an $11/tonne reduction in the French offered price adds to the nearby woe.

Cumulative EU soft wheat export licences for the season to date are now 3.34 MMT, which is 28% lower than this time last year.

FranceAgriMer today cut one point off the proportion of the French corn crop rated good to very good, taking that to 55%, well below 87% this time a year ago. Some 21% of the crop is rated poor/very poor, up one point from last week and far higher than only 2% a year ago.

At home, UK weather conditions between 26 Aug and 1 Sep were "predominantly wet" which limited harvest progress to just over 300,000 ha, said the HGCA.

They estimated the UK wheat harvest at 60% complete nationally. Their yield estimate was unchanged on a week ago at 8.3-8.6 MT/ha, up around 6-10% compared to the 10-year average.

The UK winter barley harvest is all over, and yields are said to be 10-13% above the 10-year average at 7.2-7.4 MT/ha.

The UK spring barley crop is 30% cut with yields here 9-14% above the 10-year average at 5.9-6.2 MT/ha.

The domestic winter rapeseed harvest is just about done at 98% complete. Average yields here are seen 6-12% higher than the 10-year average at 3.6-3.8 MT/ha. Only around 5% of the UK spring rapeseed crop has been harvested to date, they said.

The bottom line for EU wheat at least seems to be one of large crops, in some cases much larger than expected, which appear to have escaped dryness/heat concerns are presenting the market with a challenge.

Storage is a problem in France, and could become an issue here in the UK too given the unusually large carryover stocks from last season recently reported by Defra, once our harvest nears conclusion.

Slow export demand in the face of the usual stiff competition from the Black Sea, who's wheat crops also appear to have come in above expectations, is another hurdle to cross.

Upside potential for wheat could therefore be limited, and once the northern hemisphere corn harvest gets going in earnest there could be more pressure to the downside to come.

There's talk of dryness possibly being an issue for winter plantings in Russia, but it's far too early to call that a factor which offers the market any significant upside potential in the coming months.

Throw in general market unease over the "China Crisis" and low crude oil prices and we could be heading into a winter of discontent if you're an arable farmer.