Nogger's Blog

05/10/11 -- There's not a great deal of fresh fundamental news around this morning, in fact there's bugger all in the way of grain info out there that wasn't already in the market yesterday. So we appear to be witnessing a modest little rebound from what the newswires call "oversold" conditions.

Although you could argue that they only look oversold due to the enormous amount of hype and overbought conditions that pushed London wheat up above GBP200.00/tonne just a few months ago.

"Is there any news on Ensus re-opening, that'll turn this market around" is a question I'm getting asked a lot at the moment. Particularly by those that would like to see the grain market considerably higher than where it is now.

The answer to that is no, I haven't heard anything (which doesn't mean that it isn't going to happen of course). I am not aware of them re-entering the market to buy wheat, which clearly they would need to do before recommencing operations. Have market conditions improved enough to allow them to operate profitably now, I mean London wheat is fifty quid lower than when they shut down, so the sums must stack up now surely?

If we look at NYMEX crude around the end of April when the decision to take some downtime was probably made then in percentage terms, maybe surprisingly, crude has actually fallen more than London wheat. By 33% as opposed to 29% if you're interested.

That doesn't necessarily mean of course that the price of all-singing, all-dancing, it ticks a lot of boxes, environmentally friendly (in some eyes) bioethanol has come down 33% in the same period as well. It probably hasn't, but unfortunately I don't know the answer to that one, hopefully someone reading this will email me to tell me.

There are, I understand, potential changes in legislation in the wings for 2012 which will make it more difficult for cheaper foreign ethanol to enter the EU. So if the sums don't still don't stack up now then they may well do in the new year.

(The logic behind an industry that can only survive with government mandates that it must exist coupled with legislation that prevents us importing the same thing from places than can produce it cheaper than we can still eludes me, incidentally).

Would that be a game changer for UK wheat? Well, IF they were to run at full tilt for the whole of the first half of 2012 starting on the 1st of January then it would add half a million tonnes worth of extra demand to the UK balance sheet. How likely do you think that is? Not very I'd wager.

With UK wheat exports already well behind those of twelve months ago, as and when Ensus does re-open then it doesn't look like much of a game changer as far as the 2011/12 crop is concerned from my perspective.