EU Grains Rally Continues On Fallout From UK Leave Vote
The shakeout from Friday's shock UK referendum vote continues, with the opposition Labour party thrown into possibly more disarray than the ruling Conservatives despite the resignation of the latter's leader following the news.
There are worries now that the situation could spread to the continent and possibly bring about the downfall of the European trade union entirely.
The pound is down more than 11% against the dollar in two days, and has fallen by about 8% versus the euro during the same time.
The euro meanwhile has fallen from over 1.14 to little better than 1.10 versus the greenback for a 3.5% decline of it's own.
This helps explain the rise in value of London and Paris wheat, despite the fact that the 2016 harvest is almost upon us. They probably are in fact cutting barley in southern parts of France right now. Further north they will be waiting for drier weather to return.
Worries remain about the French harvest, with crop conditions dropping like a stone, down 4 points in the good to excellent category for wheat last week. That marks six straight weeks of declines during which ratings have been cut by -1,-2,-2,-2,-3 and now -4 points.
The market might be fretting over production prospects in France, but it isn't doing so in the FSU,
National Bank Ukraine said that the country might harvest 60-61 MMT of grains this year, and in Russia they could bring in a crop even higher than last year it is now thought. They've started harvesting in both countries now, with the Stavropol area of Russia already past the 1 MMT mark, with early yields up 12.5% on last year at 4.42 MT/ha.
Russia's exports meanwhile have dwindled, waiting for these new crop supplies to come along. Russian seaports only exported 65,200 MT of grain last week, almost all of which (61,100 MT) was wheat.
Still, season-to-date exports (to Jun 22) are up 11.7% on year ago levels at 33.59 MMT (of which 24.35 MMT is wheat).
A record harvest again this year could see them looking to test that volume in 2016/17. Ukraine won't be far behind either, and both countries traditionally cram the majority of their sales into the first half of the season, so those wanting significantly higher prices may have to wait a while yet.
