EU Grains Mostly Higher, Weak Euro Continues To Support French Market

23/06/15 -- EU grains closed mostly higher, with continued euro weakness on Greek nervousness helping support the French market. The one remaining old crop London wheat contract closed lower, but other months ended around GBP0.90/tonne firmer.

At the close Jul 15 London wheat was down GBP1.10/tonne at GBP109.90/tonne, Sep 15 Paris wheat was EUR3.00/tonne higher at EUR184.50/tonne, Aug 15 Paris corn was up EUR1.50/tonne at EUR164.25/tonne, whilst Aug 15 Paris rapeseed ended EUR0.25/tonne higher at EUR381.50/tonne.

The barley harvest is underway in Russia, Romania and Ukraine. Early yields are said to be "good" in the first two and "average" in the latter, according to Agritel.

The Russian Ag Ministry said that the country had harvested over 230 TMT of "grain" so far (assumed to be barley) and that average yields were up 18% on a year ago. Domestic barley prices in Russia are now under pressure.

The Russian Ministry picked up 33,345 MT of "grain" at their latest intervention purchase round, of which almost 30,000 MT was grade-3 milling wheat.

They're harvesting barley in France too, where the forecast is warm and dry for the next 14 days, with temperatures in Paris forecast to hit 29C on Friday. That should accelerate the early barley and rapeseed harvest, but may knock a bit more yield potential off winter wheat.

Reuters reported that Indian millers had bought around 500,000 MT of Australian milling wheat to blend in with their own lower grade domestic crop this year, and almost half of that wheat has already been shipped. They are said to potentially be in the market for a further similar volume, and may turn their attention now to French or Russian new crop when it becomes available shortly.

The Australian Bureau of Meteorology said that the developing El Niño is similar to the previous record event seen in 1997/98. Australian wheat yields were down 12.4% overall that year, with El Niño typically bringing drought to eastern states, although it can sometimes make conditions wetter than normal in Western Australia.

"While the strengthening El Niño is a concern for crops in eastern Australia, the yield outlook is by no means yet clear. The timing of any rainfall over the next few weeks will be critical for these crops," said the HGCA.

"Meanwhile, the outlook for crops in Western Australia is currently more positive, but again, rainfall at certain growth development stages will be vital for crops to optimise yields," they added.

Oil World said that the EU had imported 4 MMT of soybeans in March-May this year, a 21% increase on the same period in 2014. Brazil was the largest supplier (at 2.37 MMT) followed by Paraguay (with almost 1 MMT). The EU also imported 5,26 MMT of soymeal in the period, slightly less than the 5.32 MMT brought in the previous year.

China said that it had imported 367.7 TMT of wheat in May, a 63% increase versus May 2014. Australia (210.8 TMT) and Canada (110.7 TMT) were the largest suppliers. The country also imported 726.2 TMT of barley last month, up 9% on a year ago, with Australia (406.9 TMT) and France (252.3 TMT) the biggest sellers.

The US winter wheat harvest remains retarded at only 19% complete versus 31% done normally, hampered by heavy rains which are causing sprouting and disease issues, as well as delaying planting of second crop soybeans.

Serbia said that it expects a 2015 wheat harvest of 2.4 MMT this year, which is enough to cover their domestic needs and provide something for export.

Rabobank forecast French milling wheat prices on MATIF at around EUR180/tonne in Q4 of this year, a little below where the Dec 15 contract currently trades. Having begun the year at EUR200/tonne, French prices have steadily ground lower throughout the year, currently showing a loss of 8.6% this year so far.

London wheat prices meanwhile are down close to 18% from where they finished 2014, and Chicago wheat is down almost 15%, showing that this year's demise of the euro has helped support the French market relative to the others throughout 2015 so far. The euro is down 9.5% versus the pound and has lost 7.5% of it's value against the US dollar so far this year.