London Wheat Sets New Records Friday

02/11/12  -- Nov 12 London wheat closed GBP2.00/tonne higher at GBP212.00/tonne, with Nov 12 Paris wheat EUR1.50/tonne firmer at EUR269.25/tonne. For the week overall that places Nov 12 London wheat GBP2.50/tonne higher and Nov 12 Paris wheat up EUR5.00/tonne.

That's an all-time closing high for Nov 12 London wheat, and also the highest close for a front month in more than a year and a half. Meanwhile May London wheat closed GBP1.35/tonne higher at GBP219.35/tonne, the highest closing price for a London wheat contract ever. Nov 12 Paris wheat matched the highest close for a front month since Feb 2011

The main drivers in the market at the moment are the perception that Russia and Ukraine are, or will soon be, out of the wheat export market and we are less that halfway through the second quarter of the marketing year.

That is likely to push Europe to centre stage on the world wheat export market soon to be followed by America. Supplies, particularly in Europe, could quickly dry up in Q3 of 2012/13 - EU-27 exports are already ahead of last season's pace and that has been achieved whilst competing with Black Sea supplies. Brussels issued 405 TMT of soft wheat export licences this past week, taking the year-to-date total to 5.3 MMT, some 6% up on this time a year ago.

Meanwhile, southern hemisphere wheat prospects aren't great. Argentina has been plagued by excessive wetness and Australia by drought.

The Buenos Aires Grain Exchange estimate wheat production in Argentina this year, where the crop is currently 7% harvested, at only 10.12 MMT versus 13.2 MMT a year ago. A Bloomberg survey this week estimated reduced Australian wheat production this year will see exports at only 17 MMT in 2012/13 (Oct/Sep) - a reduction of 31% on last season.

On top of those worries, whilst it's early days yet, we already have doubts about the health of EU and US wheat crops for the 2013 harvest ahead of winter dormancy. FranceAgriMer say that only 64% of the anticipated French winter wheat area has been sown so far, compared to 88% normally at this time, as the country has been battered by heavy rain and significant early snowfalls. Incidentally, also a concern here is that these same weather conditions mean that 31% of the French 2012 corn crop is still standing in the field compared to just 4% normally at this time.

The UK has suffered similar disruptions to field work, whilst in the US in many cases winter wheat has been planted into dry soils and received only traces of moisture since. The USDA reported Monday night that crop conditions in it's first report of the new season were the worst since they began issuing weekly bulletins in 1985.

The pound jumped to 1.25 against the euro for the first time in a month on reports that a Greek court had ruled the government's austerity measures to be "unconstitutional" casting doubt over their ability to impose the required cut-backs required through.