Nogger's Blog

19/01/11 -- The wheat market appears to have recovered from a little early 2011 wobble, and seems to have the bit firmly back between it's teeth again this morning in an attempt to press on into higher territory.

Whilst old crop flirts with trying to pop above GBP200 again, plenty of people also now seem to be buying into the longevity of these prices too. New crop Nov11 London wheat is currently trading at GBP171.50, within GBP1.50 of the all-time high for the contract set on the opening trading day of 2011. A close at that tonight would be a record close for the contract.

Even Nov12 is starting to attract peoples' interest now, currently GBP1.50 higher at GBP146.50, a seemingly attractive GBP25 discount to Nov11.

Unease about the unrest in North Africa seems to be rippling around the market, with the likes of Turkey, Libya, Morocco and Jordan all coming in to buy wheat just as Algeria decides to refill it's boots.

FranceAgriMer currently project French wheat ending stocks at a tight 1.96 MMT, what they haven't perhaps told us is that those stocks are going to be in North Africa not France!

Looking around the globe, possibly the next catalyst that could send the market surging into new uncharted waters might come once winter wheat starts to emerge from dormancy in the spring.

We know that US wheat went into dormancy in a pretty poor state. The question now is how is it going to come out of it? In the case of Kansas, which accounts for almost a quarter of the entire US crop, probably not very well at all is the most likely answer.

In the last USDA weekly crop condition report ahead of the winter, based on conditions as at Nov 28 2010, Kansas wheat was rated 25% poor/very poor, and only 37% good/excellent. By the end of the year those ratings are said to have declined to 33% poor/very poor and only 27% good/excellent.

This autumn/winter has been "one of the driest planting seasons on record in the top US wheat state, and a bad omen for new crop production," say Martell Crop Projections.

Large areas of planted US winter wheat regularly don't make it through to harvest as failed fields are grazed or ripped up and replanted with other crops in the spring. It would seem that we have the potential for even more of this practice to occur this year, especially with alternative crop prices offering such lucrative returns at the moment.

The markets perception of the implications of a significant Kansas wheat crop failure are more important than what the real implications might be.

Right, were did I put that panic button...