Nogger's Blog

14/12/10 -- Jan London wheat closed GBP1.00 lower at GBP189.25/tonne, with new crop Nov also GBP1.00 easier at GBP158.00/tonne. Jan Paris wheat ended EUR5.50 lower at EUR236.00/tonne, with Nov down EUR4.00 at EUR212.00/tonne.

The market continues to attempt to reconcile the strong pace of EU and UK exports against sluggish demand from the feed sector at these levels. Also we have the issue of year-end profit-taking and book-squaring ahead of the holiday season.

Customs data released today pegs UK wheat exports for the first four months of the marketing year at almost 1.2 MMT. Virtually Defra's entire target for the whole of 2010/11 and more than double last year's pace. EU exports meanwhile are running 37% ahead of year ago levels.

Inflation figures coming out of the UK today, and the outlook for further to come on rising unemployment and imminent fuel and VAT price increases in 2011 as the government's austerity measures start to bite, paints a bleaker picture.

Cheap meat and dairy product imports into the UK, as producers elsewhere up slaughterings on the back of soaring feed prices may be temporarily insulating UK consumers from the reality of the situation.

In Europe, a short-term abundance of these products as producers exit the industry is also depressing prices, for now.

How much longer this can continue for remains to be seen. From a supply point of view there is unlikely to be any respite on the cards for another six or seven months yet. Be sure though, the longer these prices continue the more acute the downwards correction will feel when it does come.