Nogger's Blog

19/12/11 -- EU grains ended with decent gains for once with Jan 12 London wheat up GBP4.00/tonne to GBP146.00/tonne and Jan 12 Paris wheat EUR5.00/tonne higher at EUR188.50/tonne.

For both London and Paris wheat this was the highest close for a front month in just over a month. For London it was the biggest one day gain since July.

The catalyst for today's rally seems to be a combination of a developing dryness in South America storyline, plus a reversal from oversold conditions and year-end book squaring/profit-taking.

Whether this is a major change of direction remains to be seen. Nothing has changed on the European debt front which has been the main thing driving the market down from the highs set in April/May.

Things don't look too rosy for wheat production in Ukraine for 2012 and there's a question mark hanging over Argentina's ongoing wheat harvest.

"Wheat near Bahia Blanca received only 57% of normal rainfall in August through to November based on official weather reports. This was a key period in crop development, winter to spring, when southern Argentina wheat was tillering and jointing. Heavy rainfall finally developed in November, replenishing field moisture in Buenos Aires, but It was too late for wheat to recover," say Martell Crop Projections.

"Late in the growth cycle, heavy rainfall boosted grain-filling in wheat, but poor germination previously had reduced plant populations. In addition, growth was stunted from prolonged drought. Poor vegetation in early November confirmed wheat damage in southern Buenos Aires, the main area where wheat is intensively cultivated," they add.

In contrast however Australia is expecting it's second record crop in a row and increased production is also on the cards from Europe in 2012 if the weather plays ball.

To get things into perspective Argentina's wheat crop is less than half that of Australia's and Ukraine's is only a seventh of Europe's.