EU Wheat Ends At, Or Close To, Near 2-Month Highs

06/10/15 -- EU grains closed higher, led by wheat which gained on continued talk of dryness issues for winter plantings in the FSU. This was within 5 pence of the best close on nearby London wheat since mid-August. It was also the highest finish on Paris wheat since around the same time, although it's hard to say for sure that we have definitely seen a market reversal - we may need to wait for Friday's WASDE report from the USDA to get some much-needed further direction.

At the close, Nov 15 London wheat was up GBP1.55/tonne at GBP116.80/tonne. In Paris, Dec 15 wheat was up EUR3.00/tonne at EUR179.25/tonne, Nov 15 corn was EUR2.25/tonne higher at EUR166.00/tonne and Nov 15 rapeseed closed EUR2.50/tonne firmer at EUR375.75/tonne.

At home, ADAS said that the 2015 UK harvest was more or less complete, and that final yields across the range of crops are looking well ahead of recent averages.

"Good establishment conditions and adequate soil moisture throughout the main growing period greatly helped yield potential. Furthermore, opportunities to control weeds, pests and diseases throughout the season, along with near perfect weather conditions have also contributed to high yields," they said.

They see UK wheat yields averaging 8.5-8.7 MT/ha, up 10-12% on the 10-year average. Winter barley yields are seen averaging 7.2-7.4 MT/ha (up 11-14%), with those of the spring planted crop at 5.9-6.1 MT/ha (up 9-13%). For oats they see average yields at 6.1-6.3 MT/ha (up 7-10%) and for winter OSR 3.6-3.8 MT/ha (up 7-13%).

In some cases yields have been much better than these national averages, particularly in the east, they added.

Taking the middle ground of these yield estimates, then the UK should have produced a wheat crop of around 16 MMT this year using earlier HGCA planting estimates. We should also be looking at a winter barley crop of 3.2 MMT, along with a further 3.9 MMT of spring barley for a total UK barley crop of 7.1 MMT. Oat production should come in at 850,000 MT, and rapeseed output at 2.3 MMT.

If those figures are correct then we are talking a 2.7% decline in UK wheat production this year compared with 2014, a 2.9% rise in barley output and a 3.7% increase in the size of the UK oat crop, whilst rapeseed production would be 8% lower than last year.

So, UK wheat production may be around 500 TMT lower than last season, but note that carryover commercial stocks from last year's harvest were estimated to be around 1 MMT higher than at the end of 2013/14 last month at almost 2.5 MMT. For wheat in particular this looks like therefore being another challenging year, and exports thus far have hardly hit the ground running.

Stiff competition remains on the export front, not just from the Black Sea but also the Baltic countries, as well of course as France with their new record crop to shift.

Talking of strong competition from the Black Sea, Ukraine said that they'd exported a record 2.8 MMT of wheat in September, taking their Jul/Sep Q1 2015/16 exports to an also all-time high 5.5 MMT, a 20% increase on a year ago.

APK Inform currently peg this year's Ukraine wheat crop at 25.7 MMT, up 6.6% on a year ago. They see exports in 2015/16 at a record 13.8 MMT, up 26.5% on last season.

Ukraine's corn exports however won't be record high, with the government there said to have set an upper limit for these with grain traders at 16 MMT, down 21% year-on-year. That's also 2.5 MMT less than the USDA are currently predicting. Mind you they have production at what looks like a highly unlikely 27 MMT with yields averaging 6.59 MT/ha this year. Current harvest figures say that with 30% of this year's crop cut, production so far has yet to reach 6 MMT, and yields are averaging only 4.72 MT/ha.

Talk of dryness in both Ukraine and Russia being a problem for winter plantings for the 2016 harvest is getting plenty of airtime. Unfortunately exactly how serious a problem this might ultimately prove to be we are a very long way off knowing. There was similar talk this time last year in Russia in particular, yet if we believe what their Ag Ministry are telling us now then they are currently wrapping up what is expected to be a 103 MMT harvest.