EU Grains Mixed, Glass Half Full Or Half Empty?
21/01/16 -- EU grains finished mixed, but mostly a touch lower. It was the turn of Paris grains to get a little currency boost from a weaker euro today, with the pound popping back up above the 1.30 level versus the single currency.
At the close of trading, Jan 16 London wheat was down GBP0.45/tonne at GBP109.05/tonne. In Paris, Mar 16 wheat rose EUR0.50/tonne at EUR164.00/tonne, Mar 16 corn was up EUR0.75/tonne at EUR155.00/tonne and Feb 16 rapeseed was up EUR2.00/tonne to EUR356.50/tonne.
There were one or two little nuggets of bullish information out there, but they were neither large in their magnitude, nor abundant enough to put off the wave of bearish sentiment that engulfs the market at the moment.
These included a downgrade of around 500,000 MT to the EU-28's projected 2016 soft wheat crop from Strategie Grains - now seen at 143.1 MMT - down approaching 5% on a year previously. The drop is mainly due to a slightly lower planted area, plus crop damage caused by cold weather in some Eastern European countries like Latvia, Lithuania and Poland. These are the same areas of concern flagged up by the EU Commission's MARS unit at the end of 2015. EU soft wheat production of 143.1 MMT would be the smallest crop since 2013 and the first annual drop in output since 2012.
The French analysts also released their first forecast for EU soft wheat exports next season, pegging those at 28.9 MMT. Whilst that's a near 3% increase on 28.1 MMT this season, it's still well below the record 33.34 MMT that was exported in 2013/14.
In terms of EU soft wheat stocks, it was also a case of "is the glass half full or half empty?" For the current season these were reduced by 1.5 MMT, but still very large at 16.9 MMT. Reduced production and increased exports will see these fall again in 2016/17 to 14.2 MMT. Again, a step in the right direction, but not one that is sufficiently large to be a game changer.
The extra export business picked up in 2016/17 will come partly due to lower output in Ukraine this year, they suggest. This could well be true, although we could do with the euro getting back to it's "losing ways" to help those exports along. It will also still prove to be the case that Ukraine are as active as ever early next season, it may only be later on that Europe really starts to see the benefit.
In other news, the IGC added 5 MMT to their global 2015/16 wheat crop estimate, although at 731 MMT they are still more than 4 MMT below the USDA. In addition they also raised carryover stocks by 5 MMT, but again their new forecast of 213 MMT is well below 232 MMT from Washington.
"While conditions for 2016/17 winter wheat have not been entirely ideal in some regions, global harvest prospects remain mostly favourable. With only a small drop in all wheat area and average yields predicted, world production is tentatively projected 3% down y/y, at 706 MMT. Because of lower anticipated feed demand, a marginal decline in consumption is expected. Some contraction is possible in end-2016/17 stocks, but inventories could still be the second highest ever," they said.
Egypt's GASC bought 235,000 MT of Romanian, French and Russian wheat in their latest tender, paying the cheapest levels since September.
Agrimoney noted that activity in the tender was "muted, as concerns persist about the potential for disruptions in shipments to Egypt, thanks to stringent quality rules and some trade finance disruptions."
Having won a clean sweep last time, interestingly Argentine wheat wasn't even offered this time round.
Meanwhile, EU and UK pig prices have recently hit multi-year lows, say the HGCA. That could have a negative effect on feed demand in 2016.
