EU Grains Mostly Lower, Despite Strong Exports

20/02/15 -- EU grains closed mostly lower on the day, and lower for the week, with the exception of rapeseed which posted small gains.

The day ended with Mar 15 London wheat down GBP1.20/tonne at GBP120.50/tonne, Mar 15 Paris wheat was down EUR1.50/tonne at EUR185.75/tonne, Mar 15 Paris corn fell EUR1.75/tonne to EUR151.25/tonne and May 15 Paris rapeseed was up EUR0.50/tonne at EUR358.00/tonne.

For the week that puts London wheat GBP2.25/tonne lower, with Paris wheat down EUR1.25/tonne, corn falling EUR1.75/tonne and rapeseed EUR0.75/tonne higher.

Fresh news was relatively scarce. The FTSE 100 closed at 15 year highs, and just 15 points short of an all-time high. Equities appear to be offering investors better potential returns than the grain markets it would seem.

Volume has been light this week, with the US closed on Monday, Brazil off on holiday Monday and Tuesday, China now closed until late next week for their Lunar New Year celebrations and some UK traders absent all week due to the half-term holidays.

Under those circumstances, the EU has done rather well to continue to pick up some good export business.

Brussels confirmed yesterday that EU soft wheat exports are now running ahead of even last year's record pace. Egypt bought 240,000 MT of EU wheat yesterday, Algeria purchased 400,000 MT of what is widely believed to be French wheat yesterday too, and today it was announced that Morocco had bought 363,500 MT of EU wheat under a preferential tariff agreement.

Russia said that 21.2% of its winter grain crops were in poor condition. The Russian Ministry said that winter grain production could fall around 40% this year. They also today forecast spring grain and pulse plantings to fall 2.2% to just over 31 million hectares.

The Russian economy continues to look shaky, with Moody's today downgrading their sovereign credit rating to "junk" status.

In previous years the vibe out of Russia would have triggered a flood of spec money into the wheat market, but this far there's hardly been a trickle.

The situation in Ukraine remains tense, with their PM saying that the "agreed" ceasefire is "non-existent". Pro-Russian rebels are said to be amassing forces close to the strategic port of Mariupol on the Azov Sea as they prepare to attempt to take it under their control.

Private reports out of Ukraine and Russia suggest that there are a variety of problems sourcing the materials needed to fund the spring planting campaign. High prices, lack of seed, fertiliser and agrochemicals, a shortage of fuel, lack of credit and some suppliers reneging on previously agreed contracts now that prices have risen substantially all getting a mention.

For now though the market either seems to not know, or not care, about these developments.