EU Grains All End In The Red, Suddenly Stronger Euro Adds More Pressure To Paris Market

21/08/15 -- EU grains closed lower on the day and lower for the week. Outside influences like tumbling crude oil prices and concerns about the Chinese economy are adding burden to a market that was already under harvest pressure.

At the close, Nov 15 London wheat was down GBP1.00/tonne to GBP114.75/tonne, Sep 15 Paris wheat was EUR2.25/tonne easier at EUR166.25/tonne, Nov 15 Paris corn was down EUR1.75/tonne to EUR174.25/tonne, whilst Nov 15 Paris rapeseed was EUR6.75/tonne lower at EUR357.50/tonne.

For the week that puts London wheat GBP3.10/tonne easier, with the French wheat market down GBP9.75/tonne, corn EUR4.50/tonne weaker and with rapeseed losing EUR13.75/tonne. Whilst wheat is under pressure from what is turning out to be a better, and bigger, harvest than the market expected a few months ago, it is interesting to see that neither corn or rapeseed are able to buck the trend despite the fact that production in Europe of both is seen significantly lower this year.

The HGCA said that as of 18 August, "almost 50% of the UK combinable crop area had been harvested, with particularly large areas of winter wheat and spring barley harvested, especially in the south."

They estimated the UK winter wheat harvest at 40% complete nationally, with the Eastern region leading the way at around 70% done. The estimated average yield to date is good at 8.3-8.6 MT/ha, well above the 10-year average of 7.7 MT/ha. Based on their planted area estimate of 1.87 million ha that puts the UK crop potentially at around 15.5-16.0 MT/ha this year, down from 16.6 MMT a year ago.

The 2015 UK winter barley harvest is just about wrapped up at 98% complete. Average yields are also well above the 10-year average of 6.5 MT/ha at 7.2-7.6 MT/ha. Spring barley harvesting is estimated at 20% complete, with yields averaging 5.9-6.2 MT/ha, nicely above the 10-year average of 5.4 MT/ha. Using previous HGCA planting estimates that would give us a total UK barley crop of between 7.25-7.64 MT/ha this year, up from 6.9 MMT in 2014.

The winter rapeseed harvest is now seen at 90% complete, with yields averaging 3.6-3.8 MT/ha versus 3.5 MT/ha for the 10-year average. That points to a final crop this year of 2.26-2.38 MMT, which would be similar to last year.

FranceAgriMer said that the French wheat harvest is 100% complete. The spring barley harvest is also finished. For once they didn't cut corn crop ratings this week, leaving those at 55% good to very good, which is still down sharply on 87% this time a year ago.

French silo operators are queueing up to hang up the "full" signs, with Nord Cereales in Dunkirk yesterday, joining Senalia and Socomac in Rouen, in saying that there was "no room at the inn".

Rabobank said that both the EU and Black Sea wheat crops are bigger than previously expected. They added 3 MMT to their previous forecast for the EU crop, taking that up to 151 MMT which is now considerably higher than the USDA's 147.8 MMT estimate. They see Russia at 59 MMT, up 2 MMT on last month.

The Russian Ag Ministry today forecast grain production there this year at 102.9 MMT, down just 2.3% on a year ago. That includes 59.8 MMT of wheat, 17.4 MMT of barley and 13 MMT of corn (a new record).

Rabobank said that 2015/16 Black Sea wheat exports would beat last year's total by 3 MMT at 43 MMT. "The region will be the key determinant for global FOB prices," they added.

They forecast Paris wheat prices rising modestly to EUR185/tonne in the final quarter of the year and holding there in Q1 and Q2 of 2016.

London wheat has come out of the week a bit better than it's Parisian counterpart, partly due to a suddenly resurgent euro. Sterling closed the week below 1.38 against the single currency, for a weekly drop of 2.2%.

The euro has also gained ground on the US dollar this week following the release if the minutes of the July Fed meeting on Wednesday. “Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point,” they said. The market reads that as a clue that the anticipated September US interest rate rise might have been put back a little.

As the BoE are traditionally behind the Fed on moving rates, a US delay could also mean a UK delay in starting to edge rates higher. That's the sentiment anyway. Unless the pound bounces back up above the 1.38 level against the euro on Monday, then a test of support at 1.36 could be next on the cards.