EU Grains Rise - Led By London Wheat

15/11/16 -- EU grains closed almost uniformly higher, helped by a firmer tone to US markets in afternoon trade.

At the close Nov 16 London wheat was up GBP3.45/tonne at GBP139.95/tonne, Dec 16 Paris wheat was EUR1.00/tonne higher at EUR163.00/tonne, Jan 17 Paris corn rose EUR0.25/tonne to EUR163.50/tonne, Feb 17 Paris rapeseed was EUR3.50/tonne firmer at EUR392.50/tonne.

London wheat derived some benefit from a weaker sterling following the surprise news that UK inflation fell 0.1% to 0.9% in October. Analysts had been expecting a 0.1% movement the other way to 1.1%, increasing the likelihood of an interest rate rise.

Deferred months in London didn't fare so well, with Nov 17 only up GBP0.90/tonne at the close, widening the negative differential between that and Nov 16 to GBP3.80/tonne.

Meanwhile, "while both UK bread and feed wheat ex-farm averages have increased so far this season, feed wheat values have been rising faster. This has led to the gap between bread wheat and feed wheat values closing," noted the HGCA.

"Lower availability of both feed wheat and imported maize from the near continent. This is forcing the feed wheat price to rise relative to other crops e.g. milling wheat, feed barley, effectively squeezing the milling premium from beneath," they said.

Increased domestic demand for feed wheat from the bioethanol industry will also be coming into play here, although as recent history tells us this isn't something that can be relied upon ad infinitum.

Globally there are still areas where quality wheat is in short supply though. French exports have been slashed, and for the first 14 weeks of 2016/17 Canadian wheat exports (excluding durum) were down 24% at 3.76 MMT. The USDA has Canadian all wheat exports to decline only 3% year-on-year in 2016/17.

Russian exports have also been lagging year ago levels despite bumper production. This is certainly at least partly due to a lack of high grade milling wheat in this year's crop, although other factors such as weather, a wildly fluctuating rouble and Egypt's tinkering with ergot levels have also been a factor.

Russia's Ag Min said that this year's harvest is 95.8% complete at 122 MMT, including 75.8 MMT of wheat (off 98.1% of the planned area), 19.1 MMT of barley (97.2%) and 11.6 MMT of corn (70.1%).

Russian winter grain plantings for the 2016 harvest are said to be all but finished on 17.2 million ha (99.2% of the government target area).

Tunisia were said to have bought 100 TMT of soft wheat and 75 TMT of feed barley, both of optional origin, in a tender.