Nogger's Blog

18/01/12 -- EU grains finished mostly lower with Jan 12 London wheat down GBP1.50/tonne to GBP156.50/tonne and Mar 12 Paris wheat falling EUR2.50/tonne to EUR197.50/tonne.

There was a weaker tone to US markets on the back of a wetter outlook for Argentina with significant rains showing up starting this weekend and lasting through into the middle of next week.

The EU markets tried to resist moving lower, with London wheat in particular trading in positive territory for much of the day.

Chicago corn, wheat and soybeans all quickly came under pressure this afternoon though, with front month March wheat opening at USD5.99/bushel. Not only was that below the psychologically important six dollar level, it was also half a cent lower than last weeks low set when the USDA report came out on Thursday.

A close at that level would be little more than 20 cents away from the 2011 mid-December low which was also the lowest closing price for a front month since July 2010 when Russia was burning up.

Canada's farm ministry estimate world wheat ending stocks to be at the highest level in history at the end of the current season in the summer. Meanwhile Western Australia state is wrapping up a record grain harvest of it's own right now. Bumper carryover stocks from last season should see Australia export a record volume of wheat in 2011/12.

UK wheat exports in November were a bumper 442,797 MT, aided by low water in the Rhine and Danube boosting demand from the continent and beyond. Even so though, on a cumulative basis we've still exported 24% less wheat in the Jul/Nov period in 2011/12 than we had at the same point last season.

The November data included the first shipment of UK wheat to the US in two years. There's a second such consignment currently loading in Tilbury by all accounts. It's a good job that the Americans, Dutch and Spanish want our wheat because domestic demand from the feed sector is extremely flat indeed.

Meanwhile the European debt crisis lurches on from not just one disaster to another, but from several disasters to another. Ratings agency Fitch says that Greece is insolvent and that it will default on its debt, albeit in an orderly fashion. They also said that a two-notch downgrade of Italy's credit rating could be on the cards before the end of the month.

The news follows S&P's cutting it's ratings on a host of European countries, and the EFSF bailout fund itself, last week. Today lesser know ratings agency Egan Jones cut Germany, weighed down by it's exposure to the EFSF and the ECB's links to weaker banks, to AA-minus from AA with a negative outlook.