EU Grains Mixed, Wheat Exports Slow, FSU Concerns Offer Best Hope For The Bulls
06/11/15 -- EU grains closed mixed on the day but mostly higher for the week.
At the finish, Nov 15 London wheat was up GBP0.20/tonne at GBP115.00/tonne. In Paris, Dec 15 wheat was EUR2.00/tonne higher at EUR185.75/tonne, Jan 16 corn was unchanged at EUR172.00/tonne and Feb 16 rapeseed was up EUR1.75/tonne to EUR381.75/tonne.
On a front month basis, London wheat was 5 pence higher on the week, Paris wheat was up 5 euros, corn was up 7 euros and rapeseed advanced EUR3.25/tonne.
Euro weakness has helped the French markets this week, with tonight's Paris wheat close being the highest since Jul 24. Rapeseed closed the week just below Wednesday's EUR382.50/tonne highest for a front month since Aug 11.
London wheat however remains range-bound. This week's "wobble" by sterling following the news from the BoE's MPC meeting seemingly pushing an interest rate rise here further down the road, has essentially been matched by the euro.
GBP/EUR ends the week where it began it at 1.40, having peaked close to 1.42 in early trade on Thursday before the BoE press releases. Against the US dollar meanwhile sterling has slumped from an early week high close to 1.55 to finish the week around 1.5050 - it's lowest close since April.
The weakness of the euro, and the prospect of more to come, in theory augurs well for EU wheat exports - at least those priced in euros at any extent.
This theory however hasn't yet been transformed in practice though. Brussels only released 293 TMT worth of soft wheat export licences this week, down from 371 TMT worth the previous week. Season to date licences are now 7.1 MMT, some 31% below where they were this time last year.
The trend is worrying. At the end of July cumulative soft wheat export licences were up 23% compared to 2014, by the end of August they were down 17%, at the end of September they were 23.5% lower and now things are 31% behind a year ago.
The USDA currently predicts EU wheat exports to fall by less than 7% year-on-year this season, so there needs to be a massive improvement in sales in the second half of the campaign. For sure, some improvement could be expected, as supplies from certain cheaper origins dry up, but to end the season only 6.8% lower on exports now looks like a very big ask.
Another worrying trend is the fact that with EU barley export licences only totalling 100 TMT this week, after a stellar start to the season led by large sales to China, Brussels issued more EU corn import licences (442 TMT) this week than they did for wheat and barley exports combined.
If Europe doesn't export or utilise more wheat domestically, which it won't do with feed demand so slack and all this corn coming in, then 2015/16 ending stocks can only rise.
Progress with newly sown crops in Russia and Ukraine will be closely monitored and debated across the winter, and the condition of these still appears to offer the best chance of some upside in the market for the time being.
There were rumours circulating today that Ukraine might be about to introduce another of their "informal" caps on wheat exports this season, with the Ag Ministry there presumably concerned enough about winter crops to consider such a move and preserve some carryover "insurance" into 2016/17.
APK Inform said that Ukraine growers might only sow only around 5.5 million ha of winter wheat this year, some 19% less than a year ago, and that production in 2016 could fall by a third to 16.7 MMT, and that came with the caveat of "assuming normal over-wintering". Domestic wheat consumption this season is estimated at 12.7 MMT by the USDA, which if replicated next year, wouldn't leave a lot left over to export in 2016/17.
For winter rapeseed APK Inform see a best case scenario of a crop of 1.1 MMT in 2016, down 35% on this year's 1.7 MMT and the lowest since 2007.
Ukraine's 2015 corn harvest meanwhile is now said to be 85% complete on 3.5 million ha for a crop of 18.8 MMT so far. That implies final production of around 22.1 MMT versus the current USDA estimate of 25 MMT.
The Ukraine Ag Ministry say that total grain exports so far this season total 14.4 MMT, including 7.9 MMT of wheat, 3.5 MMT of barley and 3.0 MMT of corn.
In Russia meanwhile, winter grains are said to have been planted on 15.8 million ha, some 600,000 ha below this time a year ago. The Russian Ag Minister said earlier in the week that 25% of what had been sown was in poor condition.
Back to the here and now, and Europe, though. The HGCA report that UK "millers, starch and ethanol producers consumed just over 1.6 MMT of wheat in the three months to September. This is 5% down on the same period last year, but the sharpest drop was seen in the September data, which was 8% lower year-on-year." So it looks like we're not really exporting it, or using it domestically either.
Across the Channel, FranceAgriMer report that the French winter wheat crop was 90% sown as of Monday, up from 76% done a week ago and 4 points ahead of this time last year. Winter barley at 97% sown was up 2 points versus 12 months previously. The 2015 French corn harvest was 86% done, up 11 points on the week and 12 points ahead of a year ago.
