Nogger's Blog

31/12/10 -- We seem set for a quiet subdued shortened trading day, unsurprisingly. Whatever book-squaring needed doing will largely already have been done, offices will be short staffed and everyone will be looking to knock off early.

The overnight grains see soybeans 4-6c higher, corn 1-2c firmer and wheat around unchanged.

If things were to stay like that then we'd close 2010 with the following front month changes compared with 31/12/09: CBOT wheat +45%; CBOT corn +49%; CBOT soybeans +32%.

For what it's worth an unchanged close today on EU futures would show the following front month year-on-year gains: London wheat +86%; Paris wheat +89%; Paris corn +69%; Paris rapeseed +73%.

Some very respectable gains there, if you're an arable farmer, or a greedy parasitical fund manager called Tarquin.

Dryness remains a concern for winter wheat in China and the US, plus for soybeans and corn in Argentina. There are also question marks over the well-being of what wheat did get planted in Russia, and over how much of the shortfall in winter plantings will get sown in the spring.

So there's quite a few things there to keep us guessing until at least Easter.

The next raft of information to come onto the market comes in the form the USDA's WASDE and quarterly stocks reports on Jan 12th. February will bring us the conclusions of the USDA's Outlook Forum, when the first ballpark ideas on spring soybean and corn plantings in the US are released ahead of the more official March 31st prospective plantings report.

By then the Brazilian soybean harvest will already be winding down and the Argie one be just about to get going. We will also be in the thick of the Indian wheat harvest, a report on Dow Jones Newswires today quotes one top official there as saying that the government's estimate of 82 MMT - itself a record - is "very conservative."

He doesn't give what, in his opinion, is a more realistic figure - but even say a crop of 85 MMT wouldn't make very much difference at all to global wheat trade.

After that we're into the wheat harvest in North Africa and the Middle East come April/May, before moving into Turkey/Ukraine. The US wheat harvest will now have started in Texas before moving gradually north and east followed by early harvesting in Russia/Kazakhstan and Europe.

It will be this kind of early summer timeframe before we get a shot at any serious stock replenishment from the major exporters in the northern hemisphere. Personally I don't rate Russia's chances of allowing the export embargo to expire this summer as being very high. I see it being extended for at the very least another three months, and quite likely to the end of the year and maybe even beyond that into 2012.

Of course if prices are still relatively high by then, as many currently seem to think that they will be, then "the usual suspects" such as Ukraine/Kazakhstan and the Eastern European nations will be eager to cash their chips in early.

Indeed, I'd go so far as to suggest that these boys will be aggressive sellers of whatever they've got no matter what prices are doing by then.

However, we've still got six months of dwindling European supplies to get through before we reach this point, and the Eastern European shops are already largely shut.

I'll still stick with my prediction of London wheat peaking around May at GBP225-230/tonne.