Nogger's Blog

25/11/11 -- EU grains finished mostly higher for a change, with Jan 12 London wheat up GBP1.00/tonne to GBP142.25/tonne and Jan 12 Paris wheat rising EUR2.25tonne to EUR181.00/tonne.

On the week as a whole that saw Jan 12 London wheat trade down to GBP140.00/tonne, a lowest for a front month since July 2010, London wheat was down GBP2.25/tonne whilst Paris wheat fell EUR1.00/tonne.

The European debt crisis continues to morph into a volcano waiting to erupt, the fallout from which could land anywhere. This week we have seen Portugal and Hungary have their credit rating downgraded to "junk" status. The latest tremors came today as S&P's cut Belgium's rating and said that the outlook there was negative. Meanwhile yields on Italian two year bonds are now nudging 8 percent.

Don't panic though, Europe have got their best anti-volcanic eruption squad on the case. They've had a meeting about it this week, and have gone away to have a bit of a think and they've promised to get back to us in a fortnight. If there's anything left to rescue by then that is.

The euro is back under pressure, with the pound nudging 1.17 again there but falling to close near the low of the week of 1.5434 against a flight to safety that is the US dollar. A badly-received German bond auction this week seems to indicate a wholesale investment exodus out of Europe completely, although there were some reports of Japanese money switching out of Germany and into UK gilts.

Australia is said to have had a third of it's old crop wheat left in store from last season as of Oct 1st. Much of that may be low grade wheat due to last season's rain hampered harvest, a situation repeating itself again this year.

Whilst quality looks like being an issue there again this season quantity doesn't, with the National Australia Bank today increasing it's domestic wheat crop forecast from 25 MMT to 26.6 MMT.

Ukraine meanwhile looks like ending up with a record grain harvest of around 57.5 MMT in bunker weight with less than 10% of the nation's corn crop left to cut.

They've stepped up their export activities considerably in the last six weeks since the government lifted export duties on wheat and corn.

Almost halfway through their marketing year US wheat exports currently stand at 13 MMT, against a USDA target of 26 MMT for the entire season. Whilst that might sound good on paper, the fact is that US shipments have slackened off considerably in recent weeks, falling below the required average to hit that goal in six of the past seven weeks.