EU Grains Mostly Slide Further, Lower ECB Interest Rates Add Some Support

Posted by Nogger - a legend in his own mind at 19:53 | Categorized as

04/09/14 -- EU grains closed mostly lower, extending the recent slide and slumping to new historic lows for the move, although a weak euro did manage to support Paris futures a little.

The day ended with Nov 14 London wheat down GBP0.80/tonne at GBP118.70/tonne, Nov 14 Paris wheat fell EUR0.25/tonne to EUR170.75/tonne, Nov 14 Paris corn was down EUR1.50/tonne to EUR148.50/tonne and Nov 14 Paris rapeseed was EUR0.25/tonne higher at EUR323.25/tonne.

The reason for the weak euro was the ECB unexpectedly cutting their refi (borrowing) rate from 0.15% to 0.05%, along with reducing the deposit rate from the already minus 0.1% to a new minus 0.2%. The idea is to encourage bank lending and stimulate the economy in the Eurozone.

The pound rose above 1.26 against the single currency on the news.

The BOE meanwhile left UK interest rates on hold at 0.5%, with the minutes of their meeting expected next week. Last month's minutes showed that two members of the committee voted for a rise for the first time in three years. A similar vote this time round, or even an increase in the numbers advocating one, could further support the pound in the weeks ahead.

Defra said that the UK had milled 514 TMT of wheat in the 4 weeks to Jul 26, a volume that was virtually unchanged on a year ago. The proportion of home grown wheat used in the grist has increased from 63% to 75% year on year though.

They also said that wheat usage in compound feed in July was down almost 15% year on year, whilst barley inclusion was up 40%.

The HGCA now estimate that 85% of the total UK combinable crop area was harvested as at 2 September, including 90% of the wheat area. "Yields remain above average while quality remains good, although there are signs that quality of later harvested crops is starting to decline where continued rainfall has delayed harvest progress," they said. Wheat yields remain above the 10-year average of 7.7 MT/ha at 8.4-8.6 MT/ha, they added. This continues to point to a final production number of around 16 MMT or more versus only 11.9 MMT a year ago.

The details of last night's Egyptian GASC tender reveal that the one winning French bid of $240.40/tonne FOB was well below the rest of the offers from the same origin, which were in the $246-248/tonne region. When freight is added on that puts the unsuccessful French bids at around $263.50-265.50/tonne C&F versus the other winning Romanian bid of $257.98/tonne.

IKAR estimated Russia’s 2014/15 grain exports at 33.0 MMT, including 23.0 MMT of wheat, 4.5 MMT of barley, and 4.3 MMT of corn. ProZerno are in the same ballpark at 32.7 MMT, including 23.5 MMT of wheat, 3.6 MMT of barley and 4.5 MMT of corn.

These are big numbers. Last year's exports (which were already large enough to depress the market) were 19.5 MMT of wheat, 2.7 MMT of barley and 4 MMT of corn according to the USDA.

Russia's Ag Ministry said that their 2014 wheat harvest is now 60% done at 48.4 MMT.

The Ukraine Ministry said that they had exported over 5 MMT of grains so far this season, including 2.75 MMT of wheat, 1.9 MMT of barley and 377 TMT of corn.

Stats Canada are due out tomorrow with their Jul 31 grain stocks estimates, with some big numbers expected due to the large volume of carryover left from last year's record crops. The trade is anticipating Canadian all wheat stocks at 10.7 MMT, more than double those of a year ago and a 20 year high. Barley stocks are also forecast more than twice last year's 0.98 MMT at 2 MMT and canola inventories are expected to come in at 3 MMT versus only 0.6 MMT a year ago.