EU Grains Fall Again Pressured By Outside Markets, Strong Competition, Currencies

20/01/16 -- EU grains finished the day lower, with the French markets under particular pressure due to the suddenly weaker sterling. Outside markets took another pumelling, with crude falling to fresh lows around $27/barrel on both sides of the Atlantic, marking around a 75% drop since mid-2014.

EU stock markets ending the day around 3-3.5% lower as the bad news just keeps coming for the state of the global economy.

At the finish, Jan 16 London wheat was down GBP0.20/tonne at GBP109.50/tonne, Mar 16 Paris wheat was down EUR2.00/tonne to EUR163.50/tonne, Mar 16 corn fell EUR2.25/tonne to EUR154.25/tonne and Feb 16 rapeseed slumped EUR4.25/tonne to EUR354.50/tonne.

Since the last day of 2015, we've now seen London wheat drop 4% versus a Paris wheat market that's down almost 5.8%. The pound falling from around 1.3550 to below 1.30 today during this time is certainly a contributory factor in this - even if ultimately both markets are lower.

The Russian rouble, so closely tied to the value of crude oil, fell to 80 versus the US dollar and close to an all-time low today. That potentially also makes Russian wheat more competitive on the world export stage, at a time when the EU needs to be picking up as many foreign sales as possible.

Argentina's Rosario Grain Exchange confirmed yesterday that the reported 2 cargoes of wheat loading for the US there are feed grade, and said that they currently have the best part of 500,000 MT of wheat scheduled to load for foreign climbs across the next two weeks - their busiest wheat export programme in years.

South Korea's MFG confirmed today that they'd bought 55,000 MT of Argentine feed wheat at $181/tonne C&F for Mar/Apr shipment. The country's NOFI also said today that they'd purchased a 69,000 MT cargo of optional origin feed wheat. This could ultimately also prove to be Argentine material as the old South American powerhouse re-awakens and flexes its wheat export muscles once again.

All this competition comes at a time when Europe is still groaning under the weight of it's own 2015 record wheat crop which it as attempting valiantly to sell. Nevertheless, French wheat stocks are estimated at a 16-year high at the end of the current season.

Tomorrow then would not be a good day to see weekly export licence totals drop off out of Brussels, as the market will currently be very sensitive to any suggestion that these might be starting to slip (they're already down 12% on a year ago).

Soft wheat export licences last week were 754 TMT.

Agritel reported that Russia's winter wheat crop is rated 63% good, 26% fair and 11% poor - which is worse than the recent 5-year average.

Any possible concerns over production prospects there, or in Ukraine, are currently severely outweighed by more imminent considerations and over-supply worries.