New Lows For EU Grains

Posted by Nogger - a legend in his own mind at 19:02 | Categorized as

24/02/16 -- EU grains continue to grind mostly lower, with further sterling weakness seemingly unable to support London wheat.

At the finish, Mar 16 London wheat was down GBP0.70/tonne at GBP102.70/tonne, Mar 16 Paris wheat was EUR4.50/tonne lower at EUR145.75/tonne, Mar 16 corn fell EUR1.25/tonne to EUR144.25/tonne and May 16 rapeseed was down EUR2.50/tonne to EUR351.50/tonne.

For both London and Paris wheat these were the lowest closes on a front month since the summer of 2010. For corn tonight's close was the lowest since Nov 2014. and for rapeseed this was the lowest since last August.

Both sterling and euro weakness seemed to make little difference today. The pound crashed below $1.40 against the US dollar for the first time since Mar 2009 as the BoE chief Carney commented that he now wasn't ruling out the next move on UK interest rates being a cut if necessary.

The May 16/Nov 16 old crop/new crop spread on London wheat finished the day at GBP12.15/tonne, up from GBP10.45/tonne at the beginning of the month and versus GBP7.65/tonne at the turn of the year.

"The growing price difference between this season and next continues to offer an alternative to releasing grain onto a depressed spot market for forward sellers that have access to both storage and finance," said the HGCA.

You could say that if the market doesn't want old crop wheat at GBP102.70/tonne now, who's to say it will want it in November at GBP116.95/tonne even if the outlook for the pound is bearish?

That's a difference of almost 14%. If the pound was to simply match that fall in euro terms between now and then, then we'd be looking at an exchange rate close to 1.08 come November, and a cross rate of just 1.20 versus the US dollar.

ABN Amro are bearish, but not that bearish, today forecast sterling falling to $1.35 this year, and a EUR/USD low of 1.05.

Rabobank trimmed its forecasts for Paris wheat futures prices by up to EUR15/tonne from previously citing "ferocious competition abroad".

Prices at multi-year lows are flushing out some buyers. Iraq are tendering for 50 TMT of US/Canadian/Australian hard wheat. Algeria are in the market for at least 50 TMT of optional origin hard wheat for Apr/May shipment. Thailand seem 256 TMT of feed wheat for Aug/Dec shipment and the Philippines are looking for 110 TMT of similar for May/Jul delivery.

Ukraine said that planting of early spring grains there was now underway.