Nogger's Blog

29/02/12 -- EU grains finished higher with front month Mar 12 London wheat up GBP0.50/tonne to GBP165.50/tonne and Mar 12 Paris wheat EUR3.00/tonne firmer to EUR213.00/tonne.

European grains moved up once again on spillover support from Chicago wheat futures which moved above their 200-day moving average for the first time since August in overnight trade.

Fundamentally though wheat lacks much in the way of bullish news, with the existing size of the spec short in Chicago wheat perhaps the main thing it has going for it. Conversely I wonder why the existing magnitude of fund length in corn and soybeans isn't therefore bearish, but these guys have deep pockets, especially when the one-armed bandit is paying out.

World wheat ending stocks are seen at their highest levels in history for 2011/12, a record which will probably only last for twelve months, until the end of 2012/13, when they may rise even further again.

Meanwhile European exports are down by more than a third in 2011/12 and production is expected higher for the 2012/13 season.

For there to be any longevity in wheat prices at these levels it looks like it needs the continued assistance of corn. The largest US corn plantings since 1944 probably isn't the best help it could get, neither is declining demand from the ethanol sector.

America has kind of got used to dominating the world corn export market, but that seems to be changing. From accounting for 67% of all global exports as recently as 2005/06 the US has seen it's market share subsequently fall by more than 20 percentage points by 2011/12 as Brazil, Argentina and particularly Ukraine have spotted an opportunity.

Ukraine is seen ramming up corn plantings this spring to a record 5 million hectares, almost 43% up on the area that gave us a record crop of 22.5 MMT in 2011. That sets them up to potentially be very aggressive sellers in the autumn.