EU Grains Consolidate Mostly A Touch Higher
03/03/16 -- EU grains closed mostly higher in what looks like consolidation following the recent rout. US wheat futures, in which the principle bullish factor seems to be the hefty short position held by fund money, were steadier today adding support in Europe.
At the finish, Mar 16 London wheat was up GBP0.85/tonne at GBP100.00/tonne, Mar 16 Paris wheat was EUR0.75/tonne firmer at EUR144.25/tonne, Mar 16 corn fell EUR1.00/tonne to EUR147.00/tonne and May 16 rapeseed was EUR3.25/tonne higher at EUR346.75/tonne.
Fundamentally nothing much has changed. World carryover stocks are record. Production in 2016, whilst seen marginally lower than last year, is still bumper, and competition for exports is fierce.
On a UK level specifically: "The latest update of Defra’s cereals balance sheets reveal a heavier UK market situation than forecast in November. Lower H&I usage and animal feed demand, combined with bigger supplies contributed to growing surpluses. A strong export pace for wheat and barley in the second half of the season will be key to diminishing the surpluses available," say the HGCA.
For wheat, UK Jul/Dec exports of fractionally under 1 MMT out of an exportable surplus/carryover stocks estimate of 4 MMT, leave plenty to go at for the remainder of the season. It's highly likely then that carryover stocks heading into 2016/17 will be rather large at around the 2 MMT mark.
That's not a good time then to be seeing lower demand for H&I usage in evidence for wheat, barley and corn domestically.
The very large old crop/new crop spread remains the one saving grace, although the fact should not be ignored that new crop prices are in decline - they just aren't falling as rapidly as they are for old crop, at least for now.
How much longer that scenario can continue to play out remains to be seen.
We can extract a bit of bullish news from Ukraine, where 2016 wheat production is forecast 28% lower at 19.2 MMT (of which winter wheat will account for 18.6 MMT), according to APK Inform. Although they note that this is probably a worst case scenario for wheat there, favourable weather conditions could help yield potential improve between now and harvest time, they note.
Russia's prospects at this early stage are more optimistic, as indeed they are also across much of Europe - especially in the leading producing nation France where 2015/16 ending stocks are also forecast unusually high.
