EU Wheat Posts New Lows, Hit By More Bad News Out Of China

02/09/15 -- EU grains closed mostly lower, with Nov 15 London wheat ending at the lowest for a front month since late June and setting a new lifetime contract low. Sep 15 Paris wheat closed at the lowest for a front month since September 2014, and also set a new lifetime contract low.

It was a case of another day, another piece of bearish news out of China. Today's news was that China’s manufacturing sector contracted at the fastest rate in three years in August.

At the close, Nov 15 London wheat was down GBP1.95/tonne to GBP112.00/tonne. In Paris Sep 15 wheat fell EUR4.25/tonne to EUR153.00/tonne, Nov 15 corn lost EUR3.00/tonne to EUR163.25/tonne and Nov 15 rapeseed was down EUR4.00/tonne to EUR357.50/tonne.

The gap between Sep 15 Paris wheat and the benchmark Dec 15 contract has now widened to a cavernous EUR16/tonne ahead of the expiry of the Sep 15 contract, which goes off the board a week tomorrow. Dec 15 will then become the new front month, and that hit a new contract low of it's own today too, even if it is at a large premium to the Sep 15 contract.

A record French wheat harvest this year, lack of storage space at the ports, along with relatively slack export demand in the face of stiff Black Sea competition are among the factors that have been keeping the nearby contract under particular pressure.

Ukraine remain their usual active selves on the export front. APK Inform said that they'd exported 6.2 MMT of grains in the first two months of the 2015/16 marketing year, a 24% increase compared to the same period in 2014/15, and they were no slouches then.

The ever-present Ukraine farmer eagerness to turn his crop into cash as quickly as possible, and the weak domestic currency, mean that they will price any buying interest aggressively.

The Ukraine Ag Ministry estimate grain production this year at 60 MMT, a more than respectable total given all the talk earlier in the season of sharply lower output due to heavily reduced inputs due to rising import costs - not to mention the ongoing internal fighting going on in some parts of the agricultural belt.

The Ministry also forecast total grain exports at a record 36.4 MMT this season, and say that the country aims to increase grain production to around 80 MMT over the next five years. They have the land and capability to do that by adopting more Westernised farming methods, but whether their infrastructure can handle it is another matter. That will require heavy investment, although for now the West, IMF et al seem happy to throw money at Ukraine with gay abandon.

The World Bank granted Ukraine a $500 million loan at the end of August, and today said that they plan to extend that amount by another $500 million later this month.

On harvest matters, the Ukraine Ag Ministry said that the country had completed this year's campaign on 10.36 million ha, or 71% of the sown area, producing a crop of 37.15 MMT to date. The corn harvest is only just getting going, with 8k ha cut so far producing a crop of 35 TMT to date. Yields thus far are only averaging 4.36 MT/ha. The USDA have them down to average 6.59 MT/ha this year - so that one wants monitoring.

The Ag Min also said that planting of the 2016 winter rapeseed crop is 36% complete on 2987k ha.

Elsewhere, Belarus said that they'd harvested 8.9 MMT of grain so far this year.

Russia said that it's 2015 grain harvest was 58.9% complete on 27.7 million ha producing a crop of 73 MMT so far. Wheat is 62.5% harvested on 16.8 million ha. Production so far stands at 49.7 MMT, with yields averaging 2.96 MT/ha, a near 9% fall compared to a year ago.

The Russian barley harvest is 69% complete on 6.2 million ha for a crop of 14.5 MMT to date. Yields there are down 6% at 2.36 MT/ha.

As with Ukraine, the 2015 Russian corn harvest is only just beginning, with an area of 106.9k ha cut so far, which is 3.8% of the planted area. Production stands at 520.8 TMT, with yields averaging 4.87 MT/ha, an 11% fall compared with a year ago and below the USDA's forecast of 5.0 MT/ha.