EU Wheat Ends Lower, But Still Range-Bound

02/11/15 -- EU grains began the new month with few, if any, fireworks and under pressure from falling US markets. Wheat still remains range-bound though, with the market in Paris having not closed outside the EUR175-181/tonne region on front month Dec 15 since the last day of September. Nov 15 London wheat hasn't finished outside GBP112.50-117/tonne since September 22 meanwhile.

At the close, Nov 15 London wheat was down GBP1.40/tonne at GBP113.55/tonne, Dec 15 Paris wheat was down EUR1.00/tonne at EUR179.75/tonne, Nov 15 Paris corn was EUR3.75/tonne weaker at EUR161.25/tonne, whilst Feb 16 Paris rapeseed was up a euro at EUR379.50/tonne.

The pound was firmer again today, following the release of strong manufacturing data. This adds to the case for the BoE to raise interest rates here sooner rather than later, although few expect any action in Thursday's upcoming monthly MPC meeting. The minutes though will make interesting reading as ever.

Most analysts are still forecasting the US Fed to move first on rates, and the BoE to follow, possibly in Q1 of 2016. Almost everybody, with the exception of Lloyds, see the GBP/EUR rate firming to the 1.41-1.49 region by mid-2016.

That potentially gives wheat on the continent an advantage over that in the UK on the export front, although you would be forgiven for having failed to notice that so far, with season to date soft wheat export licences down 30% year-on-year versus USDA expectations for a full season decline in foreign sales of less than 7%. That leaves some significant improvement needing to be made in the second half of the campaign.

Still, at least Europe managed a clean sweep in last week's latest GASC tender - it sure seems like it's been a long time since that happened.

Competition from the Black Sea remains though. Ukraine 11.5% milling wheat is currently indicated at around $190/tonne FOB, some $5 cheaper than French "superior" wheat and $8-10/tonne under Russian 12.5% material.

Ukraine said that they'd exported 13.375 MMT of grains so far this season, including 7.361 MMT of wheat, 3.31 MMT of barley and 2.661 MMT of corn.

The USDA's FAS in Moscow upped their estimate for this season's grain crop there from 97 MMT to 102 MMT in clean weight. That includes 60.5 MMT of wheat (versus 59.08 MMT a year ago), 16.5 MMT of barley (20.03 MMT) and 12.5 MMT of corn (11.33 MMT).

They see total Russian grain exports in 2015/16 at 31 MMT, some 3% below last season's record, but still the second largest ever. Wheat exports are predicted at an all-time high 23.5 MMT (from 22.8 MMT last year), with those for barley and corn both at 3.5 MMT.

With winter wheat planting winding down in the northern hemisphere, the IGC predict that the area sown to wheat (including spring crops) for the 2016/17 harvest will decline only modestly - down 1.2 million ha to 221 million ha. "Currently there are few more profitable alternatives," they say, predicting that some growers may consider reducing inputs as a cost-cutting measure. That obviously comes with yield-reducing potential though.

EU-28 rapeseed plantings will be in line with last year's reduced level at around 6.5 million ha, they predict. Sowings in Ukraine will tumble 30% to 610,000 ha, they add. That would be the lowest area sown since the 2006 harvested year.