Nogger's Blog

19/11/10 -- EU wheat futures closed with Nov10 London wheat up GBP0.40 at GBP165.90/tonne, and Nov11 London wheat up GBP0.95 to GBP143.35/tonne. Jan11 Paris wheat closed EUR1.25 lower at EUR212.00/tonne and Nov11 Paris wheat fell EUR0.75 to EUR191.00/tonne.

It was a mixed end to a volatile week that saw Nov10 London wheat eventually end GBP2.70/tonne higher on the week, with Nov11 down GBP0.65/tonne overall. Jan10 Paris wheat ended with a nominal EUR0.50 loss and Nov11 finished EUR4.00/tonne lower than last Friday.

The trade is trying to weigh up the implications of China raising bank reserve requirements by 1/2%, with some of the opinion that it will dampen demand for commodities from the Asian giant.

Seeing as this is the fifth such hike this year, and none of the previous ones seem to have harmed grains demand at all, it seems unlikely to me.

There is also concern that a possible interest rate increase, possibly as early as over the weekend, might also cut Chinese grain and oilseed imports. They upped interest rates by a half point last month, the first movement since 2007, but again that didn't subsequently seem to have an impact on demand for food commodities.

A further tightening of monetary policy, combined with an appreciating yuan and rising interest rates may indeed curb imports of some raw materials, but they don't make fridge freezers, mobile phones and Super Dry hoodies out of corn, wheat and soybeans. At least not yet anyway.*

The Chinese authorities announced that they will add 300,000 MT of rapeseed oil to the list of commodities that they will auction off next week in an effort to keep food price inflation under control. However, these dwindling government-owned stockpiles will need to be replaced sometime.

The euro had a rare up day, based on reports that Ireland's debt-crippled banks are to get a handout. That depressed Paris wheat which also missed out to the US in Egypt's latest tender yesterday.

Consumers are starting to get edgy over the potential availability, or lack of it, of UK wheat come the spring. Indeed with increased talk of Russia's export embargo extending at least until the end of 2011, and another large and hungry mouth to feed in the shape of Vivergo next summer, buying interest in new crop wheat is already starting to pick up.

* technically not quite true, Samsung were I recall working on developing an "eco-friendly" mobile phone made out of new type of bioplastic derived from cornstarch, before the pedants stick their oar in. That could prove to be about as eco-friendly as making petrol out of wheat.