EU Grains Mostly Lower, But Rapeseed Presses On To New Highs

05/12/16 -- EU grains closed mostly lower, save for rapeseed which pressed on to new highs.

The day ended with Jan 17 London wheat down GBP1.25/tonne at GBP135.70/tonne, Dec 16 Paris wheat was EUR3.50/tonne lower at EUR156.50/tonne, Jan 17 Paris corn was down EUR0.75/tonne to EUR162.75/tonne and Feb 17 Paris rapeseed was up EUR2.75/tonne to EUR412.50/tonne.

For rapeseed this was new highest close on the continuous front month chart since April 2014, yet for Dec 16 wheat this was a lifetime contract low!

As the HGCA's Jack Watts said recently, trading London wheat is trading the currency market by proxy. And so it was again today with sterling briefly hitting 1.2040 against the euro, it's best levels since late June after Italy’s Prime Minster conceded defeat in the country’s weekend constitutional referendum.

Sterling also hit an eight-week high against the US dollar today.

Overall though despite recent gains (the pound closed below 1.10 against the single currency as recently as Oct 11), sterling is still 10% lower versus the euro since the Brexit vote. Despite recent falls, Jan 17 London wheat is still up 15% since the UK voted to leave the EU on Ju1 21 - most of that increase being clearly due to currency weakness rather than anything else.

Where the pound goes from here therefore looks like the major contributory factor to the future of London wheat price for the remainder of the season. Further sterling strength will hurt what has so far been a very good start to exports, and will also make newly harvested imported corn cheaper. A return to renewed sterling weakness in 2017 will of course have the opposite effect.

In grain news, Saudi Arabia were said to have bought 945 TMT of feed barley in their tender for 960 TMT, paying from around $178-192/tonne C&F for Jan/Mar shipment.

Australia's ABARES forecast a record wheat harvest of 32.64 MMT this year, up almost 35% on year ago levels due to favourable weather in the east. Barley production will rise 24% despite lower plantings to an also record 10.64 MMT, they said. Canola output was pegged at 3.58 MMT, a 21.6% increase compared to a year ago.

Strategie Grains estimated this year's EU-28 rapeseed crop at 20.08 MMT, down 8.7% on a year ago.

The Russian Ag Ministry said that their 2016 wheat harvest had now reached 75.9 MMT in bunker weight off 98.2% of the planned area. Barley harvesting is 97.3% complete at 19.1 MMT and the corn harvest is 85.8% over at 14.6 MMT.

APK Inform reported that Ukraine seaports increased the volume of their grain exports last week to 922.5 TMT, up from 836.3 TMT the previous week. That included 403.9 TMT of wheat, 456.4 TMT of corn and 62.2 TMT of barley.