Don't Panic The Cavalry Are Coming

14/01/11 -- After a couple of quiet weeks over Christmas and New Year it was back to business as usual this past week for EU grain exporters, with Brussels granting 675,000 MT of soft wheat export licences - the fourth largest weekly total of the 2010/11 marketing year so far.

Once again France picked up the lion's share with 537,000 MT of that. Export licences for a further 128,000 MT of durum wheat were also granted. Price clearly isn't rationing demand too much just yet by the looks of it.

FranceAgriMer currently peg their exports for the current season at 18.66 MMT, a 9% increase on last year, with exports to non-EU destinations accounting for a record 11.8 MMT of that. That is starting to look conservative.

They currently see 2010/11 wheat ending stocks declining 42% year-on-year to less than 2.2 MMT. They're going to need to slow down their sales considerably to even make them as high as that with five and a half months of the marketing year remaining.

Meanwhile French supplies of durum wheat are also dwindling after Algeria bought 225,000 MT of the grain over the Christmas/New Year period. Local prices have shot up from EUR280/tonne to EUR315/tonne since the beginning of the month as traders scramble to unearth sufficient stocks to fulfil the Algeria order, according to a report on Bloomberg.

French officials have been quick to hotly deny rumours that some form of export ban might need to be introduced before the end of the current marketing year as wheat continues to pour out of the country.

Southern hemisphere suppliers like Australia and Argentina will soon step up sales to fill the void left by dwindling French stocks, they insist.

Yet we still don't know how much of Australia's wheat isn't going to make the grade required for bread-making. Some suggest only half the rain-deluged crop might be suitable instead of almost all of it normally.

Additionally, Argentina's reputation as an unreliable trade partner is bordering on legendary, and has been built on solid foundations. The Kirchner government have a history of tinkering with export quotas and duties in an attempt to wring every last peso in income for their cash-strapped coffers.

Recent years have been littered with a series of on-off strikes between farmers and the government over taxes on grain exports. Indeed, farmers there are set to begin a week long strike on Monday. Port workers too are prone to regular strikes over pay and working conditions.

Meanwhile they're rioting on the streets of North Africa whilst we continue to turn grains and oilseeds into fuel. An activity that is mandated and subsidised by, at best well-meaning but ill-conceiving politicians that merely seem to be lining the pockets of big business.

At worst it won't just be big business who's pockets are getting lined either will it? "Bollocks to the starving in Africa, I want a yacht."