EU Grains Mostly Lower, London Wheat Helped By Faltering Pound

05/11/15 -- There were few fireworks to get traders excited today, with EU grains mostly consolidating and giving up some of yesterday's gains. The exception was London wheat which derived a small boost from a weaker sterling following the Bank of England's regular monthly MPC meeting.

At the close, Nov 15 London wheat was up GBP0.55/tonne at GBP114.80/tonne, Dec 15 Paris wheat was down EUR0.75/tonne at EUR18375/tonne, Nov 15 Paris corn was EUR1.25/tonne weaker at EUR161.00/tonne, whilst Feb 16 Paris rapeseed fell EUR2.50/tonne to EUR380.00/tonne.

Once again fresh news was thin on the ground. The FAO raised their view on this year's global wheat crop by 1 MMT to 736 MMT, some 3 MMT higher than the current USDA estimate. World ending stocks were also increase 1 MMT, but at 207 MMT these are 21 MMT less than the USDA predicted a month ago.

"A higher (production) estimate for the EU more than offset lower forecasts for Australia and the US," they said.

World corn production was lowered by 3 MMT from a month ago to 1004 MMT, and ending stocks cut a similar amount to 220 MMT. If you think that the disparity with the USDA's wheat numbers are noteworthy then consider that Washington are currently 31 MMT lower on the size of the global corn crop than the FAO, and 32 MMT below them on 2015/16 carryout.

Winter wheat plantings in the northern hemisphere are ongoing under mostly favourable conditions with the exception of Russia and Ukraine, the FAO noted.

"In the EU, planting continues for all regions under favourable conditions except for Poland where dry and cold weather have hampered germination," they said.

For corn, the "EU, harvest has begun, though areas in south-east faced abundant rain, which is slowing harvest. Conditions are largely unfavourable and production is expected to be below the 5 year average due to the heat wave and lack of rainfall in central and eastern Europe.

"In Ukraine, harvest is ongoing and yields are expected to be down due to the persistent dryness and high temperatures in central and western regions in previous months," they added.

The Bank of England voted 8-1 again to leave UK interest rates on hold at 0.5% it was revealed at lunchtime. For the third month running, Ian McCafferty was the only member of the MPC to vote for a rise.

The pound was weaker on the news, as whilst no rate increase was expected, one or two thought that a 7-2 vote might have been on the cards, backing the notion that UK rates might be set to increase early in the New Year.

Other negatives for sterling today were the downgrading of the Bank's economic growth forecast from 2.8% to 2.7%, as well as a warning that inflation risks were skewed to the downside over the next two years.

The pound was overbought, so all this news will have encouraged some profit-taking. The day ending with the GBP/EUR rate back below 1.40 and GBP/USD around 1.52.