London Wheat Posts Fresh Lows

24/11/11 -- EU grains ended mixed with Jan 12 London wheat down GBP1.75/tonne to GBP141.25/tonne and Jan 12 Paris wheat falling EUR0.25/tonne to EUR178.75/tonne.

Jan 12 London wheat fell as low as GBP140.00/tonne at one stage, the contracts lowest level since October 2010 and the lowest price for a front month in almost a year and a half. New crop Nov 12 set a twelve month low of GBP136.00/tonne.

It was a relatively quiet session with the US closed for Thanksgiving. Following a meeting in Strasbourg between German Chancellor Angela Merkel, French President Nicolas Sarkozy and new Italian PM Mario Monti the French leader said that changes to treaties relating to how Europe is run will be proposed ahead of the next EU leaders summit on December 9. Merkel stressed that the suggested alterations would not affect the ECB. Yields on Italian 10 year bonds rose up back above 7% whilst Super Mario was out of the office.

Brussels issued soft wheat export licences for 352 TMT this past week, bringing this season's cumulative total to 6.1 MMT, 36% down on this time last year. The EU also extended the suspension of import duties on feed wheat and barley imports until the end of June 2012.

Meanwhile Russia has exported 13.7 MMT of grains so far this marketing year, a 50% increase on twelve months ago and meaning that they are in line to hit their suggested self-imposed limit of 23-24 MMT by the end of March.

That's another four months of aggressive marketeering still remaining from them, likewise from Ukraine, and with Kazakhstan eagerly waiting to take up any slack that may be in evidence come the spring.

The International Grains Council released their November crop estimates, pegging world grain production up 64 MMT on a year ago at 1.816 billion tonnes, which it says is due to "sizeable recoveries in output" in the aforementioned three former Soviet states.

For wheat, the second largest world crop ever combined with "ample carry-in stocks from last year" will boost availability this year taking 2011/12 ending stocks to 200 MMT - the largest in a decade, they estimate.

For corn, a new record high global crop of 853 MMT will also be met with record consumption of 861 MMT. With corn harvesting in the northern hemisphere just about complete attention is now starting to switch to the southern hemisphere where "farmers in Argentina, Brazil and South Africa are set to plant more maize than in 2010/11," they said.

Adding that "prospects remain favourable, with rains in South America and Australia mostly boosting yield expectations for wheat and helpful for plantings of maize and sorghum."