Nogger's Blog

14/01/11 -- EU wheat futures closed lower Friday with Jan London wheat down GBP2.65 to GBP193.35/tonne and Nov GBP3.00 lower at GBP167.50/tonne. Paris wheat saw Mar down EUR4.25 at EUR251.00/tonne and Nov EUR4.50 lower at EUR223.75/tonne.

A stronger euro dented Paris wheat's ambitions, as too did a weaker US market on end of week consolidation and profit-taking ahead of a three day weekend in America.

On the week as a whole Jan London wheat fell GBP2.25/tonne with Nov down GBP1.10/tonne.

Commodities in general took a knock after China upped it's banks' reserve requirements for the seventh time in the recent past, in a concerted effort to try to rein in inflation. So far however this seems to have largely failed to affect demand for grains, or indeed anything else from the Far Eastern powerhouse.

Argentine wheat production estimates are creeping higher, with a crop of around 15 MMT now expected, double last season's output.

Of the three big commodities, wheat, corn and soybeans, wheat is the one where global and US stocks aren't cited as running at historically tight levels. In addition the US wheat harvest is now only four months away from kicking off in the south.

The weather in Europe has warmed up, with widespread heavy rains welcome after a cold and dry December.

Whilst demand for milling wheat remains strong, feed wheat offtake could fall off a cliff come May on a combination of falling livestock numbers and turnout following a long hard winter.

The jungle drums tell me that feed compounders will be looking at some very hefty price increases by then, which may cut demand even more acutely than normal once we get past Easter - weather permitting.