UK Wheat Boosted By French Exports

11/10/16 -- EU grains closed mixed Tuesday. Continued sterling weakness saw London wheat press on to new highs for the move.

The day ended with Nov 16 London up GBP1.15/tonne at GBP131.50/tonne, Dec 16 Paris wheat was up EUR0.25/tonne at EUR158.00/tonne, Nov 16 corn was unchanged at EUR158.00/tonne and Nov 16 rapeseed was up EUR1.25/tonne to EUR381.25/tonne.

Sterling weakness continues to support London wheat. How low can the pound go? Pundits are lining up to predict parity with the euro and 1.10 versus the US dollar - maybe lower in the case of the latter.

The economic news coming out of the UK doesn't stack up with such sterling weakness however, and the pound is certainly oversold and undervalued at these levels. Still, the market is the market, and spec money has the sniff of some easy cash to be made, so the path of least resistance is for now undoubtedly lower.

This means that London wheat is probably over-priced, but likely to go higher still, before there's a shake-out.

Exports are going well, with France providing a nice new nearby ready market. The UK exported 255.9 TMT of wheat in August, up from 201 TMT in July, with 78 TMT (or 30%) of that going to France.

That means that two months into the 2016/17 season the UK has exported 456.9 TMT of wheat versus only 181.6 TMT in the same period in 2015/16.

Barley exports are also going well. At 280.9 TMT for Jul/Aug these are the highest since 2003/04 and up on 266.6 TMT a year ago. Spain is the top barley home during this period(131.5 TMT).

As long as the pound remains under pressure, UK exports should continue to do well into these nearby homes.

Further afield competition from Russia among others remains strong. They've harvested 114.5 MMT of grains so far this season off 92.5% of the combinable area. That includes 75.5 MMT of wheat (97.7%) and 19.0 MMT of barley (96.7%). The 2016 corn harvest is 34.7% complete at 5.4 MMT. Plantings for the 2017 harvest are now said to be 83.8% complete in 14.5 million ha.

Russian grain exports via seaports are up 2.1% Jan/Sep to 24.3 MMT.

Ukraine's 2016 grain harvest meanwhile now stands at 46.7 MMT off 80% of the planned area. The wheat and barley harvests are over. Corn is 33% harvested at 7.8 MMT. Winter grain planting for 2017 is 72% complete.