EU Grains Mostly Lower Despite Dollar Strength

16/12/15 -- EU grains closed mixed, but generally a little lower, despite dollar strength ahead of an anticipated US interest rate rise this evening. The market got what it expected on that score - with the Fed tweaking up its benchmark interest rate to between 0.25%-0.5%, from the previous range of 0%-0.25%. That confirmation came after EU grain markets closed however.

At the close of EU trading hours, Jan 16 London wheat was down GBP0.70/tonne at GBP111.50/tonne. In Paris, Mar 16 wheat was down EUR3.75/tonne to EUR175.00/tonne, Jan 16 corn rose EUR0.25/tonne to EUR159.50/tonne and Feb 16 rapeseed fell EUR3.50/tonne to EUR367.75/tonne.

The pound closed at 1.50 versus the US dollar tonight, within half a cent of its lowest finish against the greenback in around 8-months.

In theory a weaker pound (and euro) should support UK/French grains, but there are plenty of willing sellers out there - and in some cases some other currencies that are even weaker against the US dollar than our own.

The pound is down 4.3% versus the US currency in the last 12 month. The euro has declined 11.7% in the same period. The Russian rouble is down by 27% during this time, and the Ukraine hryvnia has slumped 33.6% in the past year.

Competition for export homes thus remains fierce, with Ukraine saying that the nation's seaports exported 32.92 MMT in the first 11 months of the 2015 calendar year, a 13.8% increase versus the same period in 2014.

Russia might end up exporting a record volume of grains (21.09 MMT) in the first half of the current season, said Rusagrotrans yesterday.

Argentine farmers meanwhile are also now said to be looking at world wheat prices in a new light, facing a peso devaluation and following the agreed withdrawal of the export tax on wheat.

UK interest rates are expected to begin to rise in the new year sometime, which should also then start to firm sterling too, although the exact timing of this event is far from clear. UniCredit today forecast the first UK rate rise to come next May, co-inciding with inflation here hitting 1%.

Current prices have flushed out some international buyers, but they are spoilt for choice who to give their business too. Tunisia are today reported to have booked 100,000 MT of milling wheat and 50,000 MT of feed barley, both of optional origin, for Feb/Mar shipment.

That adds to recent interest from Jordan, Syria, Ethiopia, Algeria etc. Israeli private buyers today also booked 80,000 MT of optional origin corn, but passed on their tender for 20,000 MT of sorghum.

Ukraine said that winter wheat plantings there are complete. Only 91% of the originally intended winter wheat area got sown (5.68 million ha), along with 87% of the expected winter barley area (913k ha) and 79% of winter OSR (649k ha).

The Ukraine Ministry say that 12% of these plantings have yet to emerge, and that 29% of what has is in poor condition (although that's down from 33% a month ago it's still a high proportion).