Slip Sliding Away

EU wheat is on the slide, with London futures down around GBP3.00-4.00/tonne this morning and Paris wheat around EUR4.00-5.00/tonne lower.

The November Paris future currently trades at EUR222.50/tonne, well outside of the recent EUR230-236/tonne trading range. Although there is still an inverse in this market, the size of it is starting to narrow. That looks set to continue as the volume of open interest declines.

That open interest is still very sizable, even if it is more than 20,000 lots less than it was a few weeks ago. Not exactly a stampede for the exit door, but there certainly seems to be an orderly queue starting to form.

There isn't too much support coming from the overnight eCBOT market today, with corn slumping back under USD5.00/bu, and wheat 13 3/4c lower within sight of USD7.00/bu. Despite looming record production, soybeans remain the strongest leg although they too are slipping dragged down by wheat and corn.

Rain has started to arrive in the Volga region of Russia which may boost winter plantings a little, although they are still expected to fall short of the 18 million hectares that the government had hoped for.

Ideas that they can still bring in a grain crop of 60-65 MMT once the harvest in Siberia and the Urals winds up, combined with carryover stocks of 20-26 MMT (depending on who's figures you believe), potentially means that they can still sneak through to next season without imports. Domestic usage is pegged at around 75-78 MMT.

The question that the bulls need to ask themselves is "are we really that short of wheat?" The resounding answer seems to be no from where I am standing.

Next up are Argentina, where production could come in anywhere between 10-13 MMT, again depending on who's numbers you want to run with. Even the bottom end 10 MMT represents a increase of a third on last season. Anything above 13 MMT represents an increase of 75% or more.

Hot on their heels is Australia where 22-25 MMT is the range of popular estimates, that's potentially as much as 15% more than 2009/10.

US winter wheat plantings are expected to rebound 3-5 million acres this year, and the combines will be in amongst that by the spring.

Yet, there are some news reports around that big prices are here to stay. Hang on a minute, I've got Elvis at the door....