EU Reports
30-10-2014 13:09 PM | EU Reports
30/10/14 -- EU grains trade higher again, with the wheat market looking to extend its winning run to four out of four for the week so far.

Just after noon, May 15 London wheat is up GBP1.20/tonne to GBP130.75/tonne, Nov 14 Paris wheat is EUR1.25/tonne firmer at EUR174.75/tonne, Nov 14 Paris corn is up EUR1.00/tonne to EUR146.00/tonne, whilst Nov 14 Paris rapeseed trades EUR0.50/tonne higher at EUR335.00/tonne.

The HGCA's contention that much of the current world record production forecasts are already "priced in" appears to hold some water. The trade is already starting to look at crop production prospects for next year, and the don't have to look any further than Russia to find a potential problem.

IKAR yesterday usurped SovEcon's suggestion that Russia's 2015 wheat crop could fall below 50 MMT with comments that production could fall as low as 46.5 MMT, even if they did throw in the "rider" that this number was preliminary and pessimistic.

"Serious drought developed last summer continuing in September. The Southern District is Russia’s most important winter wheat area, accounting for 40-42% of the national harvest. It is made up of 4 districts Krasnodar, Stavropol, Rostov and Volgograd.

"The 6-month rainfall time series confirms very severe drought in the Southern District, where a 120 mm soil moisture deficit has accrued. Rainfall has increased recently, denting drought, though record heavy rain would be needed to fully restore ground moisture," said Martell Crop Projections.

"Very poor conditions in winter wheat are confirmed by remote sensing. An updated satellite image, valid September 20-October 15, reveals widespread vegetative stress," they add.

Spec money appears to think that it's spotted and opportunity to get involved in the grains sector again, being acutely aware that weather-related problems in Russia have sent global wheat prices soaring twice in the last 5 years. Is history set to repeat itself in 2015? It's too early to say with any degree of confidence, but it certainly can't be ruled out.

It also needs to be considered that the acute weakness of the Russian rouble - down 21.7% against the US dollar since the beginning of July - will be a factor in grower's decisions whether or not to replant in the spring. It will also affect their ability to purchase spring seed and fund other agricultural inputs. And this is a scenario that could also be replicated in Ukraine.

MDA CropCast don't seem to believe the hype though, they released a world wheat production estimate for 2015/16 today of a record 720.4 MMT, a 7.8 MMT increase on their figure for the current season.

They are also not as bearish on wheat production prospects in Australia as some other analysts, standing by their forecast from last week of 24.04 MMT.

The pound slid below 1.60 against the dollar today, following last night's announcement from the US Federal Reserve that quantitative easing is to end this month. As we head into what some analysts call "Naughty November" it is worth noting that sterling has fallen against the US currency during the penultimate month of the year in 10 of the last 14 years, and in 14 of the last 20.

Talking of seasonal trends, there are also ones for London wheat, and Chicago corn and soybeans all to move higher in the last quarter of the year, a pattern that all three seem to currently be conforming to.

In other news, Euronext announced the launch of a Paris rapeseed meal and oil contract starting Nov 14th. The first delivery positions will be for next season's harvest.

30-10-2014 08:49 AM | EU Reports
29/10/14 -- EU grains staged another day of decent gains. "Some of the (recent) support has come from a later than usual US maize harvest and drier than normal conditions in key wheat growing areas of Australia," said the HGCA.

At the close Nov 14 London wheat was up GBP0.70/tonne at GBP122.10/tonne, Nov 14 Paris wheat finished EUR4.00/tonne higher at EUR173.50/tonne, Nov 14 corn was EUR1.25/tonne firmer at EUR145.00/tonne and Nov 14 rapeseed ended up EUR6.50/tonne to EUR334.50/tonne.

Open interest in front month Nov 14 London wheat was down to 172 lots as of last night's close, following heavy deliveries against the contract in the past couple of days.

The HGCA also noted dryness in South America delaying summer plantings there, and suggested that "these are the first bullish sentiments in some time after an almost continuous flow of bearish news over the past six months or so."

They didn't (in that article) mention worries about poor emergence of Russian winter grain plantings. Agrimoney quoted one Black Sea farm operator as saying that "20% of (it's Russian) winter seeded area has emerged in a poor state and is not well prepared to face the winter."

Meanwhile the 2014 Russian harvest soldiers on, hampered by heavy snowfall in some areas of the Urals and Siberia. The former is only 77% harvested on 2.6 million hectares, versus 3.1 million this time last year.

Kazakhstan is also struggling to get the last of it's 2014 harvest in, with 12.5% of the crop still out in the fields as of Oct 27, as winter closes in. In the north of the country, the first snow fell in mid-October and prior to that it rained almost continuously, reducing the quality of this year's wheat crop. They are now said to be buying in better quality Russian wheat to blend in with their own domestic harvest.

Ukraine said that they'd exported 11.24 MMT of grains so far this year, up 25% from a year ago. Wheat accounts for 56% (6.27 MMT) of that total, with barley responsible for 29% (3.21 MMT) and corn an additional 14% (1.62 MMT). They are expected to soon start to major on corn exports, with harvesting of that crop around 75% complete. UkrAgroConsult said that Ukraine exported a record 19.87 MMT of corn in 2013/14, a 58% increase versus the previous marketing year.

Jordan cancelled a tender for 100 TMT of optional origin hard milling wheat due to lack of offers, and immediately re-issued another one.

Given recent price action I wouldn't be surprised to see Egypt's GASC back in the market again in the next few days.

Meanwhile it looks like speculative money is coming back in, and fund activity in the grains sector is increasing. Yesterday saw a record volume trade in Chicago soybeans and meal. Dec 14 soymeal in Chicago is up 28% since the first of the month, it is still however 25% below the highs of 2014, it is also 29% under the 2013 high and 30% beneath the highs of 2012. Incidentally all three of those annual highs were set in the summer months, this year it was June, last year it was July and in 2012 it was set in August.

Buying your summer soymeal requirements on the spot market has proved to be a very expensive mistake therefore in each of the last three years. Currently soymeal in the UK for next summer is around GBP60/tonne cheaper than spot material. I'll leave that thought with you....

29-10-2014 12:59 PM | EU Reports
29/10/14 -- EU grains are staging another day of decent gains. "Some of the (recent) support has come from a later than usual US maize harvest and drier than normal conditions in key wheat growing areas of Australia," said the HGCA.

At noon most active month May 15 London wheat is up GBP1.50/tonne at GBP131.50/tonne, Nov 14 Paris wheat trades EUR1.75/tonne higher at EUR171.25, Nov 14 corn is EUR1.50/tonne firmer at EUR145.75/tonne and Nov 14 rapeseed is up EUR4.00/tonne to EUR332.00/tonne.

Open interest in front month Nov 14 London wheat is down to 172 lots as of last night's close, following heavy deliveries against the contract in the past couple of days.

The HGCA also noted dryness in South America delaying summer plantings there, and suggested that "these are the first bullish sentiments in some time after an almost continuous flow of bearish news over the past six months or so."

They didn't (in that article) mention worries about poor emergence of Russian winter grain plantings. Agrimoney quoted one Black Sea farm operator as saying that "20% of (it's Russian) winter seeded area has emerged in a poor state and is not well prepared to face the winter."

Meanwhile the 2014 Russian harvest soldiers on, hampered by heavy snowfall in some areas of the Urals and Siberia. The former is only 77% harvested on 2.6 million hectares, versus 3.1 million this time last year.

Kazakhstan is also struggling to get the last of it's 2014 harvest in, with 12.5% of the crop still out in the fields as of Oct 27, as winter closes in. In the north of the country, the first snow fell in mid-October and prior to that it rained almost continuously, reducing the quality of this year's wheat crop. They are now said to be buying in better quality Russian wheat to blend in with their own domestic harvest.

Ukraine said that they'd exported 11.24 MMT of grains so far this year, up 25% from a year ago. Wheat accounts for 56% (6.27 MMT) of that total, with barley responsible for 29% (3.21 MMT) and corn an additional 14% (1.62 MMT). They are expected to soon start to major on corn exports, with harvesting of that crop around 75% complete. UkrAgroConsult said that Ukraine exported a record 19.87 MMT of corn in 2013/14, a 58% increase versus the previous marketing year.

Jordan cancelled a tender for 100 TMT of optional origin hard milling wheat due to lack of offers, and immediately re-issued another one.

Given recent price action I wouldn't be surprised to see Egypt's GASC back in the market again in the next few days.

Meanwhile it looks like speculative money is coming back in, and fund activity in the grains sector is increasing. Yesterday saw a record volume trade in Chicago soybeans and meal. Dec 14 soymeal in Chicago is up 28% since the first of the month, it is still however 25% below the highs of 2014, it is also 29% under the 2013 high and 30% beneath the highs of 2012. Incidentally all three of those annual highs were set in the summer months, this year it was June, last year it was July and in 2012 it was set in August.

Buying your summer soymeal requirements on the spot market has proved to be a very expensive mistake therefore in each of the last three years. Currently soymeal in the UK for next summer is around GBP60/tonne cheaper than spot material. I'll leave that thought with you....

29-10-2014 08:29 AM | EU Reports
28/10/14 -- EU grains traded higher again Tuesday, extending the recent rally. There does seem to be an element of fund/spec money coming back into the grains sector, which could be a supportive factor going forward.

Currently Nov 14 London wheat ended up GBP0.95/tonne to GBP121.40/tonne, Nov 14 Paris wheat finished EUR4.50/tonne firmer at EUR169.50/tonne, Nov 14 Paris corn was unchanged at EUR143.75/tonne, whilst Nov 14 Paris rapeseed has zoomed EUR5.50/tonne higher to EUR328.00/tonne.

What might be tempting the funds back? Falling energy and equity markets are a couple of reasons being cited. The FTSE 100 is currently down 7% since early September, and NYMEX crude is down more than 16% in the same period. Meanwhile Chicago wheat, corn and soybeans have all risen by 10-13% during this time.

There's a whiff in the air that the grain markets are ripe for a quick buck still to be made. Even if we have seen the harvest lows, prices still aren't that much up from the lowest levels seen in more than 4 years in wheat, corn and soybeans. Some are clearly seeing that as opportunity.

Rumblings that all is not well with the crops in the FSU, suggest that there could be some decent upside potential ahead, particularly if they get a hard winter.

There's still 12.5% of Kazakhstan's 2014 grain harvest to bring in yet, which will be no easy feat with temperatures there now down to -10C.

Russia's winter grain plantings are all in, and in a timely manner too, but various reports suggest that lack of rainfall prior to the recent freeze leaves crops there poorly established and not in a good condition to make it comfortably through the winter.

The Russian rouble meanwhile has fallen to all time lows against the US dollar and euro today. Not only does that mean that spring seeds and fertiliser/agrochemical costs will be sharply higher in 2015, it is also encouraging growers to hang onto what grain they haven't sold from the 2014 harvest.

Ukraine also has currency troubles of it's own. As of Oct 24 winter barley plantings had only been completed on 838.4k hectares, 18% down on a year ago and a 5-year low. Weather conditions there are similar to those in Russia, with moisture deficits and cold temperatures reducing crop conditions heading into winter dormancy.

The Ukraine Ministry said today that the country's 2014 grain harvest is 89% complete.

The Russian Ministry said that the country had exported over 14 MMT of grains so far this season, a rise of a third on a year ago. Wheat accounts for the vast majority of that activity at 11.62 MMT, or 83%.

Elsewhere, the USDA's FAS in Morocco pegged the 2014/15 cereal crop there at 6.8 MMT, a 30% fall on a year ago. They also said that the prospects for 2015/16 had started under "unfavourable conditions" with a significant rainfall shortage and low water levels in the reservoirs.

At home, there were 27 re-tenders against the in delivery Nov 14 London wheat contract, taking the total number of tenders to 1070 out of a total open interest of 1217 lots.

28-10-2014 08:59 AM | EU Reports
27/10/14 -- EU grains closed mostly higher, having spent a large part of the day lower, with London wheat in particular playing catch-up with Friday night's sharp losses seen in Paris and Chicago.

The day ended with Nov 14 London wheat up GBP0.65/tonne to GBP120.45/tonne, Nov 14 Paris wheat closed EUR0.75/tonne lower at EUR165.00/tonne, Nov 14 Paris corn fell EUR0.75/tonne to EUR143.75/tonne, whilst Nov 14 Paris rapeseed was down EUR0.50/tonne to EUR322.50/tonne.

Today was the first tender day on the Nov 14 London wheat contract, in a tender period with 4 weeks left to run. There were over 1000 lots tendered for delivery, which is the majority of the open interest in the contract. That doesn't suggest that end-users are queueing up to buy UK wheat, so traders are thinking let the futures market have it instead.

Meanwhile, there's still an open interest against the Nov 14 Paris wheat contract of in excess of 30,000 lots, and that contract expires in just two weeks! With delivery seemingly not an option, as the futures stores in Rouen are still closed for intake, some fun and games look likely in that contract between now and Nov 10.

Fresh news was relatively thin on the ground, as is often the case on a Monday. Today's early price action could probably be attributed to a feeling that the market has gone up "too much, too quick" with London wheat up around 11.5% and Paris wheat gaining more than 13% from the lows set only around 4 weeks ago.

However, late in the day strength in soybeans and meal when the US markets opened spilled over into the grains, sending London wheat up to close on the highs of the day in what it has to be said looks like a bit of a false close.

The EU Commission's MARS unit tweaked their estimates for grain yields here in Europe this year, although most of the changes were only relatively minor.

Average 2014 EU soft wheat yields were trimmed from the 5.88 MT/ha forecast a month ago to 5.87 MT/ha, although that's still up versus 5.82 MT/ha a year ago and 5.4% above the 5-year average. Winter barley yields were also reduced from September's 5.61 MT/ha to 5.57 MT/ha, and those for rapeseed shaved from 3.33 MT/ha to 3.32 MT/ha. Corn yields were left unchanged at 7.59 MT/ha.

"Summer crop yields at EU-28 level are high and maize yields in Romania, Hungary and Bulgaria are forecast more than 25 % above the five year average," they noted.

One area of slight concern is Ukraine, where the grain maize yield "is forecast to be below the long-term trend (albeit close to the 5-year average), due to the dry and warm weather observed this summer." Corn yields in Ukraine were forecast at 5.7 MT/ha versus the 5.81 MT/ha predicted a month ago and last year's bumper 6.4 MT/ha.

Conversely, spring wheat and barley yields in Russia are expected to be at "near-record" levels, they said.

Kakzakhstan said that they'd harvested 16.2 MMT of grains so far this year, off 13.1 million hectares, or 87.5% of plan. The Ag Ministry forecast a final bunker weight crop of 17 MMT, down 6.6% versus 18.2 MMT a year ago. In clean weight that means around a 15.5 MMT crop, up from the 14-15 MMT output forecast previously, they said.

The country's grain exports in 2014/15 will fall to 8 MMT from 8.7 MMT a year ago, they also estimated.

Bangladesh signed deals to buy 250 TMT of Ukraine corn in an inter-governmental trade.

The latter's exports are holding up well, although wheat shipments are slowing. The country's seaports shipped out 673 TMT of grains last week, only slightly down on the 689 TMT exported the previous week. Wheat accounted for 212.5 TMT of the total, with barley 378.9 TMT and corn 81.6 TMT, said APK Inform. In percentage terms that gives wheat around a 32% share of last week's export total, versus 50% the previous week and 77% for the week prior to that.

28-10-2014 08:49 AM | EU Reports
27/10/14 -- EU grains closed mostly higher, having spent a large part of the day lower, with London wheat in particular playing catch-up with Friday night's sharp losses seen in Paris and Chicago.

The day ended with Nov 14 London wheat up GBP0.65/tonne to GBP120.45/tonne, Nov 14 Paris wheat closed EUR0.75/tonne lower at EUR165.00/tonne, Nov 14 Paris corn fell EUR0.75/tonne to EUR143.75/tonne, whilst Nov 14 Paris rapeseed was down EUR0.50/tonne to EUR322.50/tonne.

Today was the first tender day on the Nov 14 London wheat contract, in a tender period with 4 weeks left to run. There were over 1000 lots tendered for delivery, out of a total open interest of around 1400 lots. That doesn't suggest that end-users are queueing up to buy UK wheat, so traders are thinking let the futures market have it instead.

Meanwhile, there's still an open interest against the Nov 14 Paris wheat contract of in excess of 30,000 lots, and that contract expires in just two weeks! With delivery seemingly not an option, as the futures stores in Rouen are still closed for intake, some fun and games look likely in that contract between now and Nov 10.

Fresh news was relatively thin on the ground, as is often the case on a Monday. Today's early price action could probably be attributed to a feeling that the market has gone up "too much, too quick" with London wheat up around 11.5% and Paris wheat gaining more than 13% from the lows set only around 4 weeks ago.

However, late in the day strength in soybeans and meal when the US markets opened spilled over into the grains, sending London wheat up to close on the highs of the day in what it has to be said looks like a bit of a false close.

The EU Commission's MARS unit tweaked their estimates for grain yields here in Europe this year, although most of the changes were only relatively minor.

Average 2014 EU soft wheat yields were trimmed from the 5.88 MT/ha forecast a month ago to 5.87 MT/ha, although that's still up versus 5.82 MT/ha a year ago and 5.4% above the 5-year average. Winter barley yields were also reduced from September's 5.61 MT/ha to 5.57 MT/ha, and those for rapeseed shaved from 3.33 MT/ha to 3.32 MT/ha. Corn yields were left unchanged at 7.59 MT/ha.

"Summer crop yields at EU-28 level are high and maize yields in Romania, Hungary and Bulgaria are forecast more than 25 % above the five year average," they noted.

One area of slight concern is Ukraine, where the grain maize yield "is forecast to be below the long-term trend (albeit close to the 5-year average), due to the dry and warm weather observed this summer." Corn yields in Ukraine were forecast at 5.7 MT/ha versus the 5.81 MT/ha predicted a month ago and last year's bumper 6.4 MT/ha.

Conversely, spring wheat and barley yields in Russia are expected to be at "near-record" levels, they said.

Kakzakhstan said that they'd harvested 16.2 MMT of grains so far this year, off 13.1 million hectares, or 87.5% of plan. The Ag Ministry forecast a final bunker weight crop of 17 MMT, down 6.6% versus 18.2 MMT a year ago. In clean weight that means around a 15.5 MMT crop, up from the 14-15 MMT output forecast previously, they said.

The country's grain exports in 2014/15 will fall to 8 MMT from 8.7 MMT a year ago, they also estimated.

Bangladesh signed deals to buy 250 TMT of Ukraine corn in an inter-governmental trade.

The latter's exports are holding up well, although wheat shipments are slowing. The country's seaports shipped out 673 TMT of grains last week, only slightly down on the 689 TMT exported the previous week. Wheat accounted for 212.5 TMT of the total, with barley 378.9 TMT and corn 81.6 TMT, said APK Inform. In percentage terms that gives wheat around a 32% share of last week's export total, versus 50% the previous week and 77% for the week prior to that.

25-10-2014 10:59 AM | EU Reports
24/10/14 -- EU grains closed mostly lower, and at or near session lows in wheat and rapeseed, at the end of a very choppy session. Good early gains were completely wiped out in late in the day selling after US grains turned red in end of week consolidation.

Wheat on both sides of the Channel, plus Paris corn and rapeseed all still managed to post weekly gains however.

The day ended with Nov 14 London wheat down GBP0.20/tonne at GBP119.80/tonne, Nov 14 Paris wheat was down EUR4.50/tonne at EUR165.75, Nov 14 corn was EUR1.25/tonne lower at EUR144.50/tonne and Nov 14 rapeseed fell EUR0.75/tonne to EUR323.00/tonne.

For the week, London wheat was still GBP3.35/tonne higher though, with Paris wheat adding EUR5.75/tonne, corn EUR2.00/tonne and rapeseed gaining EUR1.00/tonne.

Much of the early excitement surrounded warnings from SovEcon that Russian crop prospects for 2015 are already looking shaky. Whilst the Russian Ministry say that autumn winter grain sowing is now 98.5% complete on 16.3 million hectares (compared to 13.8 million this time a year ago), SovEcon say that the condition of these crops is "extremely weak".

A hard winter could therefore lead to much higher levels of winterkill than normal. Meanwhile the weakness of the rouble means that domestic prices of spring seed and other inputs are rising rapidly, which could also have a negative impact on spring cropping plans, and fertiliser/pesticide applications next year.

This currency weakness is also encouraging farmers to hold onto their 2014 crops as a hedge against the falling value of the rouble.

SovEcon said that grain production in Russia next year could ultimately fall below 90 MMT, with the wheat crop slipping under the 50 MMT mark.

The Russian Ministry say that the 2014 grain harvest is 94.4% complete on 42.6 million hectares, producing a crop of 106.7 MMT to date. Wheat accounts for 61.1 MMT of that total, with barley adding an extra 21 MMT. Both those harvests are almost done. There's still a quarter of this year's corn still out in the fields though. That harvest total to date stands at 9.1 MMT.

The Urals region is the main area left with a large area still unharvested, with almost 27% of crops there still to be cut compared to around 9% a year ago.

Nov 14 London wheat hit GBP122.00/tonne earlier in the session, a level not seen since the last day of August. Nov 14 Paris wheat touched GBP172.00/tonne, a near 7 week high. Although the market ultimately gave up all of these gains, these Russian jitters are unlikely to have gone away. The market will be acutely aware that Russia has seen two crop disasters in the last 5 years, both of which have largely been responsible for sending London wheat to over GBP200/tonne.

EU soft wheat exports meanwhile continue to beat even last season's record pace. Brussels issued 646 TMT worth of soft wheat export licences this past week, taking the cumulative marketing year total to 9.1 MMT, an 8% rise compared to a year ago. Remember that the EU Commission sees final soft wheat exports down by almost 17% in 2014/15 versus last season's record.

Societe General forecast French soft wheat sowings at 4.98 million hectares, with those in Germany at 3.23 million, for the 2015 harvest. Both figures are almost identical to plantings last year.

FranceAgriMer said that the 2014 French corn harvest was 38% complete as of Monday, double what it was the previous week, and well ahead of only 14% done this time a year ago. Early yield reports are generally very good.

They said that the French winter wheat crop is 55% planted versus 34% a week ago and 51% a year ago. The crop is 34% emerged against 18% last week and 31% a year ago. The French winter barley crop is 80% sown, up from 55% a week ago and 5 points ahead of this time last year.

24-10-2014 08:59 AM | EU Reports
23/10/14 -- EU grains closed mixed, but mostly higher. Front month Nov 14 Paris wheat closed at a EUR0.75/tonne premium to the Jan 15 contract. A week ago, and the day before margin calls on short positions in it were doubled, it was at a discount of EUR4.50/tonne. As contract expiry draws nearer (on Nov 10) we can expect to see further erratic behaviour from the front month.

The day ended with Nov 14 London wheat up GBP1.00/tonne to GBP120.00/tonne, Nov 14 Paris wheat closed EUR2.50/tonne firmer at EUR170.25/tonne, Nov 14 Paris corn was up EUR2.75/tonne to EUR145.75/tonne, whilst Nov 14 Paris rapeseed was EUR0.50/tonne higher at EUR323.75/tonne.

Following much criticism, Euronext announced today that its milling wheat futures benchmark will adopt new specifications taking effect with the September 2017 contract month. The new fixed specification will be a minimum of 11% protein (on a dry matter basis), hagberg falling numbers of a minimum 220 and a minimum bushel weight of 76kg/hl.

"Euronext also welcomes the decision that the accredited delivery silo operated by Socomac will adopt exactly the same 2014 protein content and Hagberg falling number requirements in its General Terms & Conditions as Sénalia for wheat for the 2015 and 2016 crop years," they also said.

The Ukraine Ag Ministry forecast winter grain plantings at 7.5 million hectares, including 6.2 million ha of wheat. They said that planting of the latter is now 96% complete.

APK Inform estimated that around 5% of crops in the troubled Donetsk region of Ukraine will go unharvested, along with around 25% of the area around Lugansk. In total that equates to production of around 530 TMT, they said. They also figure that around 25-30% of the sunflower crops in these areas will remain unharvested, the equivalent of around a further 3-400 TMT.

Rusagrotrans forecast Russia's October grain exports at 3.5-3.6 MMT, up from a previous estimate of 3.3-3.4 MMT, and a record for the month. They said that Russia had already shipped 1.78 MMT of grains in the first half of the month, of which 72% was wheat, 18% barley and 9% corn.

Whilst winter grain planting in Russia is nearing completion, concerns remain that earlier dryness means that crops are under-developed heading into winter dormancy. A sharp cold snap over the next few days, with temperatures forecast to dip as low as 20-25 F even in southern parts of the country, could cause some damage. "Crops have not yet reached the stage of development in which they can face these temperatures easily," said Agritel.

MDA CropCast raised their forecast for the EU wheat crop by 2.5 MMT from last week, also upping corn production here by 2.1 MMT and increasing their outlook on European barley output by a similar amount. They also forecast increases for Russian barley (+2.9 MMT) and corn (+0.7 MMT), along with a smaller rise in wheat (+0.6 MMT) and barley (+0.4 MMT) in Ukraine.

They seemed relatively unmoved by suggestions that all is not well with the Australian wheat crop, leaving their production estimate unchanged from a week ago at 24.04 MMT. Widespread rains in WA have slowed wheat drydown somewhat, they said. Meanwhile drier weather elsewhere in the country has been favourable for crop maturation, they added.

With the US harvest running late, Societe General said that there could still be time for "one last leg down in corn prices" if and when the pace picks up. Any downside would however be short-lived, citing strong demand and reduced plantings in South America, they said.

Good yield reports coming from the French harvest could eventually boost corn production there past the 17 MMT mark, it is thought. That would be a record harvest for them, further stretching logistics and storage capacity already weighed down by the large and varied quality of the 2014 wheat crop and sluggish exports.

23-10-2014 08:49 AM | EU Reports
22/10/14 -- EU grains finished higher across the board, with both London and Paris wheat managing their best closes in 6 weeks. However "although particular factors are lending support to prices, markets are very unlikely to see a significant rally," said the HGCA.

The day ended with Nov 14 London wheat up GBP2.50/tonne to GBP119.00/tonne, Nov 14 Paris wheat ended EUR3.75/tonne firmer at EUR167.75/tonne, Nov 14 Paris corn rose EUR0.50/tonne to EUR143.00/tonne, whilst Nov 14 Paris rapeseed was EUR3.00/tonne higher at EUR323.25/tonne.

The spread between Nov 14 and Jan 15 Paris wheat narrowed for a third day as more nearby shorts are squeezed out. Even so, the open interest in the front month is still large given that contract expiry is only 2 1/2 weeks away.

A partial success for France in last night's Egyptian tender was supportive, even if they did have to share the business with Russia and Romania.

It also confirms that the latter two origins still have wheat to sell, even if they were priced well over the winning French origin bid. That was at least $10/tonne under the other remaining FOB quotes out of France, and the different between those and the successful Black Sea quotes were much closer.

Rosstat said that Russia had exported 16.8 MMT of grain in the Jan-Sep period, almost double the volume shipped out twelve months previously. Wheat accounts for 12.6 MMT of that total, with corn adding a further 2.4 MMT and barley an extra 1.5 MMT.

Rusagrotrans forecast the Russian winter grains planted area at 16.3 million hectares, up more than 7% on last year. They said that this would be similar to the area planted for the 2008 record harvest, although obviously there's a long way to go yet.

Nevertheless, they became the first analyst to dip their toe in the water of 2015, issuing a preliminary grain production estimate for next year of 96-104 MMT.

A sharp cold snap is now in the forecast for Russia (and Ukraine) this week. There's some chatter that although the winter crop has been sown in a timely manner, development has been retarded due to lack of moisture. That's only arrived in the past week, leaving the crop little time to develop before these freezing temperatures come along.

That could have a negative impact on production next year, although it's far to early to see this as a significantly bullish factor at the moment, it warrants keeping an eye on.

The Ukraine wheat crop in 2014 totalled 23.7 MMT, say the Ag Ministry there, a 6.3% rise compared to last year. They say that the proportion of the crop suitable for milling is only 54% versus 75% a year ago.

They see wheat exports in 2014/15 at 11.76 MMT, a 28% rise year-on-year.

Agritel say that the Ukraine corn harvest is progressing quickly and has now reached 15.4 MMT. A crop of 27 MMT is expected this year, according to the Ukrainian Agrarian Confederation.

22-10-2014 08:19 AM | EU Reports
21/10/14 -- EU grains closed higher. Nov 14 Paris wheat again posted better gains than the deferred contracts, as seemingly more shorts get squeezed out. The Nov 14/Jan 15 differential was EUR4.50/tonne on Friday when the increased front month margin calls were announced, and tonight that's narrowed to EUR2.75/tonne.

Certainly there will be some shorts on the Nov 14 London contract intending to delivery against it, as thankfully we have more than a just couple of futures stores here in the UK!

Nov 14 London wheat finished up GBP1.00/tonne at GBP116.50/tonne, Nov 14 Paris wheat was up EUR4.25/tonne at EUR164.00/tonne, Nov 14 Paris corn was EUR1.50/tonne higher at EUR142.50/tonne and Nov 14 Paris rapeseed rose EUR2.50/tonne to EUR320.25/tonne.

Yet again fresh news was relatively hard to find. The USDA reported late last night that the US 2014 corn and soybean harvests weren't as advanced as many had expected at 31% and 53% done respectively. The forecast for the week ahead is conducive to some decent progress being made between now and next Monday's report however. There's already talk of some US farmers considering leaving their corn in the field over winter, given current low prices.

UK farmers have been a bit more active in selling wheat following the recent rally from 4 year lows. "If you want wheat, you can get it," one trader told me today. The question is "who wants it?"

The sharp rebound in wheat production this year means that the UK is presented with a bit of a dilemma. Domestic demand is only so so at the moment, certainly from the feed manufacturer's perspective. Lower milk and beef prices and an assortment of cheap alternatives have seen to that. There's also an abundance of on farm fodder stocks for later in the winter.

"There’s only so much that can be absorbed by domestic demand, and a strong export programme for wheat and barley will be needed to avoid a large carryover into 2015/16," say the HGCA.

Make that a very large carryover, as of the anticipated 3.3 MMT surplus left over for export or to be carried into next season, only 142 TMT had actually been shipped abroad by the end of August (the most recent figures available).

Whilst an increase in demand from the bioethanol sector is widely anticipated in 2014/15 (up 7% according to Defra), that's only part of the story. "When it comes to bioethanol gross margins, there’s another side of the coin that needs to be considered. Ethanol prices have also been in decline as global demand has been unable to keep up with supply," the HGCA note.

Demand, or the lack of it, for the DDGS produced by these plants is also another factor to consider. This is also an industry that's been habitually plagued by operational disruptions in its relatively short history, so continuing to run at anything like "full steam ahead" for the entire season might also prove to be a challenge.

In other news, the Ukraine Ministry reported that the corn harvest there was 60% done on 2.8 million hectares, producing a crop of 14.77 MMT to date. Yields are averaging 5.28 MT/ha, if they continue to do so then they'll end up with a crop of 24.6 MMT, which would be 20% down on last year's record 30.9 MMT (using the USDA's estimate for production in 2013).

The Ukrainian Agrarian Confederation estimated corn production there at 27 MMT today.

Ukraine has also harvested 9.16 MMT of sunflower off 94% of the planned area, along with 3.19 MMT of soybeans, off 87% of the expected area.

Winter grain plantings are nearing completion in Ukraine at 92% done on 6.9 million hectares. Wheat accounts for the vast majority of that at 96% done on 5.9 million ha, with barley adding a further 779k ha (73% of plan).

APK Inform lowered their estimate for this year's Russian corn crop by 5.6% to 11.7 MMT, although that's still just about a record crop, as it's slightly ahead of last year's production of 11.6 MMT.

The Russian Ministry said that this year's corn harvest was now almost 73% done, producing a crop of 8.8 MMT so far. Yields are averaging 4.56 MT/ha so far versus 5.29 MT/ha a year ago. That suggests a final bunker weight crop of a little over 12 MMT this year.

Ag Canada estimated Canada’s 2014 wheat crop at 27.49 MMT versus previous estimate of 27.71 MMT, a drop of more than a third on last year's bin buster.

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