Nogger's Blog

10/11/11 -- EU grains ended mixed with Nov London wheat down GBP0.75/tonne to GBP149.50/tonne and Nov Paris wheat rising EUR1.00/tonne to EUR188.50/tonne. Nov Paris wheat had a quiet day to exit the board compared with yesterday's dramatic fireworks. Jan Paris wheat was EUR2.00/tonne lower at EUR186.00/tonne.

European debt concerns are growing, Reuters are reporting that French and German leaders have discussed the possibility of a kind of ring-fenced two-tier Eurozone, with stronger countries separated from the weaker ones. The question is who are the stronger ones?

The Italian Treasury auctioned off EUR5 billion one-year bills at a yield of 6.08 percent, a 14 year high. In a similar auction in Oct the yield was 3.57 percent, meaning that Italy's borrowing costs have risen 70% in a month. They will also attempt to sell EUR3 billion of five-year debt on Monday.

An escalation of Italy's difficulties would quickly engulf the rest of Europe. There are rumours of heavily indebted France going on a negative watch with a major rating agency.

Egypt bought 120,000 MT each of Russian and Ukraine wheat at levels around USD250-251.50/tonne FOB for February shipment. Those are similar prices to last week's wining bids from the same two protagonists.

The cheapest French offer was USD259/tonne. Argentine wheat was offered as low as USD239/tonne but has a significant freight disadvantage. US wheat wasn't even offered once again.

Brussels issued a respectable 502,000 MT of soft wheat export licences for the week to Nov 8th. Even so exports so far are only 5.54 MMT, 37% down on this time last year.

Russia says it has exported 13.3 MMT of grains so far this marketing year and expects shipments to reach 17 MMT by the end of 2011. That suggests that they will hit their self-imposed 24 MMT export ceiling around mid-March if they are able to maintain that pace across the worst of the winter. By that point they will probably have shipped around 21 MMT of wheat to foreign buyers, a whopping 425% increase on 2010/11.

There are plenty of other sellers who will be more than happy to fill their shoes in the spring if and when they do pull the plug on exports. Indeed Kazakhstan will be hoping that they do so sooner rather than later as they would dearly like to use major Russian ports like Novorossiysk, currently busy with exporting grain of it's own, as a gateway to markets in the west.

The corn harvest in Ukraine is 81% complete at 17.5 MMT, according to the Ministry there. That suggests a final crop of 21.6 MMT, almost 10 MMT up on last year. The USDA estimate that 12 MMT of that is looking for an export home this year, an increase of 140% on 2010/11.

The French corn harvest is seen at 15.0-15.2 MMT, around 9-10% higher than last year. The EU-27 corn crop is forecast almost 2 MMT, or 12.6%, higher than last season at 62.85 MMT according to the USDA.