EU Wheat Begins Week In The Ascendancy

06/02/12 -- EU grains began the start of the week higher with Mar 12 London wheat ending up GBP0.70/tonne to GBP168.15/tonne and Mar 12 Paris wheat rising EUR5.00/tonne to EUR222.25/tonne.

Paris wheat garnered particular support from the weak euro, against which the pound rose close to 1.21 after weekend talks between the Greek government and it's bondholders yet again proved to be another false dawn. It was June 10th 2011 when Paris wheat last closed higher than this.

A report on Reuters suggests that 10-15% of EU wheat and 15-20% of it's rapeseed crop had suffered some winterkill damage at the hands of the recent Arctic blast, without saying where these figures came from.

The words "some winterkill damage" don't necessarily mean "killed" but it won't take long for that to get misreported. It's far too early to start writing off the crop just yet.

Crop losses are certain however in Ukraine, although the dry autumn is more likely to be responsible for that than the recent cold spell. From September 1 to mid-December only 50 mm of precipitation fell compared to around 140 millimeters normally, according to Martell Crop Projections.

Crops in central Ukraine are currently protected by 50 cm of snow, according to Agritel. Closer to the Black Sea frost may have damaged some rapeseed and barley, but it's too early to tell the extent of any such damage, they add.

This will mean a reduced wheat crop in 2012, with some estimates suggesting that production could as much as halve compared with 22 MMT last year. The spin-off is that corn plantings in the spring though will undoubtedly be sharply higher, a decent growing season would see a record corn crop harvested in Ukraine for the second year in a row.

The gap between Nov 12 and Nov 13 London wheat has narrowed to show next year's crop now running at just a GBP0.75/tonne discount to 2012's.

The trade is fancying a bullish slant to Thursday's upcoming USDA reports - always a bad sign and one that would make a bearish theme a double blow.

Trying to second guess the USDA is a bit like attempting to explain the offside rule and the workings of the internal combustion engine to a woman me Grandad always used to say. He ran over and killed me Gran when she strayed offside during a game of footie in the park when I was six. A hard man, but fair.