EU Wheat Mixed, Is The Bull Run Faltering?

25/01/12 -- EU grains finish mixed with Mar 12 London wheat down GBP0.25/tonne to GBP163.25/tonne and Mar 12 Paris wheat rising EUR2.25/tonne to EUR208.00/tonne.

It was a strange sort of a day with May 12 London wheat posting a GBP5.50/tonne trading range, closing at GBP164.25/tonne despite hitting GBP168.50/tonne early doors. How anybody allowed themselves to get stiffed at the latter price is unclear.

London wheat is now up over GBP23.00/tonne from the lows of just six weeks ago, a serious rise that you would think must have been generated by an equally serious change in circumstances.

All that we have to go on though is a decline in Argentine corn production, that is more than made up for by a rise in output elsewhere around the globe, according to the USDA and IGC. The world wheat crop has also got bigger since then, according to the same two sources.

The only other bull story is perhaps yesterday's suggestion that Russia "might" introduce some form of restriction on grain exports before too long. This particular "news" is far from new, it's been know since at least October that they wanted to cap grain exports at around 24-25 MMT.

I estimate that they will have exported 19.5-20.0 MMT by the end of this month. Their exports have probably slowed to around 1.5 MMT in January and are likely to remain at that level going forwards, so they will probably get through to the end of April before they hit their self-imposed target.

Is Russia potentially being out of the market for a couple of months May/Jun really a big serious issue? I don't think so. A blessing Kazakhstan might think.

At home, feed manufacturers in the UK are unseasonably quiet, and well bought too. Almost to a man they are only looking to make sales, not to buy any more raw materials. There were apparently plenty of export offers of UK and Baltic wheat for all positions today but not a single bid in the market.

Meanwhile, we have world wheat plantings for the 2012 harvest projected at 225 million hectares - the largest since 1998. The US all wheat area is forecast at 57.9 million acres, an increase of 3.5 million from last year. Canadian sowings are seen up 12% and world ending stocks for 2011/12 and 2012/13 are seen as the highest in history by many.

Oh, and American farmers are expected to sow the largest corn crop since the war this spring.

And we haven't even mentioned the European debt crisis yet.