EU Wheat Higher On Argentina And Rumour Mill

Posted by Nogger - a legend in his own mind at 17:06 | Categorized as

24/01/12 -- EU grains finished with new front month Mar 12 London wheat up GBP4.00/tonne to GBP163.50/tonne, and Mar 12 Paris wheat up EUR4.25/tonne to EUR205725/tonne.

This was the highest close for a front month on London wheat in almost four months.

Yesterday's rains in Argentina were a bit disappointing, but subsequent overnight rain and more in the forecast for tomorrow should improve the outlook for soybeans at least, if not corn.

Crop estimates for the latter vary quite widely now from 18 MMT to 23 MMT generally, with the USDA out on a solitary limb at 26 MMT.

The overnight US grains closed lower, and London and Paris wheat both traded either side during the session before pushing on in afternoon trade once America opened.

One rumour going around to send the Chicago market higher straight after the opening today was that the drought in Argentina means that the government there may introduce some sort of export ban this year. The government deny that this is the case.

Another was that Russia may be about to introduce either a grain export duty and/or ban. Yet another was that they are in the market to buy US wheat. The latter seems particularly unlikely with an abundance of cheaper wheat much closer to home in Kazakhstan.

Russia has said for some time that they wish to cap foreign sales at around 24-25 MMT this season, and they look likely to finish January with something like 19.5-20.0 MMT already shipped, so they are likely to hit their maximum around the end of March give or take a few weeks.

Kazakhstan will be looking to take advantage of any window of opportunity that comes its way, having only shipped 4.1 MMT of grains abroad in the Sep-Dec period. They've got to get their skates on to hit their 15 MMT target for the 2011/12 season. They have the wheat that's for sure after a post-Soviet era record harvest last year, it's logistics that's their problem, although a Russian export sabbatical would help free up some transport and portside capacity.

Nevertheless, it looks like the market is determined to attempt to forge it's way higher yet, unless (or is it until?) the European debt crisis pulls the rug from under this particular recovery.