EU Wheat: What's Good For The Goose(d)....

28/10/11 -- EU grains finished mixed but mostly higher with Nov London wheat climbing GBP1.75/tonne to GBP153.00/tonne and Nov Paris wheat flat at EUR186.75/tonne.

On the week as a whole Nov London wheat ended with gains of GBP5.25/tonne whilst Nov Paris wheat fell EUR1.00/tonne on the back of a rising euro.

The market has seemingly been reassured by the news on Europe including a haircut of 50% on Greek debt, although how long the euphoria will last is open to debate. The Fitch agency says that the proposed haircut still constitutes a default and we now need to consider what's good for the goose(d) Greece, now surely by default must also apply to the equally gandered Italy, Spain, Portugal etc.

Meanwhile for wheat the market fundamentals are getting more bearish by the day. Bumper cereal production is now confirmed for Russia, Ukraine and Kazakhstan - frequently the three most aggressive sellers in the market.

The IGC yesterday increased their world wheat production estimate by 5 MMT and their 2011/12 ending stocks figure by 9 MMT to 202 MMT - the first time that they've exceeded 200 MMT since 2001/02. World corn production was also upped 10 MMT from last month and 2011/12 carryout by 4 MMT to 123 MMT.

Russia will export a record 20 MMT of wheat this season, with Ukraine shipping 9 MMT despite a slow start to the season now that export duties have been removed, they added. Both numbers are higher than the current USDA estimates by 2 MMT and 1 MMT respectively.

In amongst all this the IGC also pegged Australia's wheat crop at a near record 26.2 MMT, and increased it's export potential to 18.5 MMT - the most in fifteen years. Hefty old crop carryover stocks of 8.6 MMT mean that wheat inventories at the end of the 2011/12 marketing year will be barely changed despite Australia exporting the second highest volume in it's history.

It maybe isn't a coincidence then that EU soft wheat exports slumped to an eleven week low of just 163,000 MT yesterday. That makes our marketing year-to-date exports 4.51 MMT versus 8.09 MMT a year ago, whilst imports are almost 2 MMT higher than twelve months ago at 2.67 MMT.