Nogger's Blog

13/04/12 -- EU grains finished mostly lower although May 12 London wheat bucked the trend closing GBP1.00/tonne higher at GBP175.65/tonne, new crop months were GBP0.55/tonne easier. The more liquid May 12 Paris wheat fell EUR0.75/tonne to EUR209.00/tonne.

On the week as a whole that puts front month May 12 London wheat GBP3.90/tonne higher, but new crop Nov 12 GBP3.00/tonne lower. That means that the gap between May 12 and Nov 12 has increased by more than fivefold since the turn of the year.

Clearly something is amiss with front month London wheat which has now appreciated by more than 15% since the turn of the year. Paris wheat meanwhile is only up 3% since then and Chicago wheat is down by almost 5%.

Exactly the same thing happened a year ago. On the first day of May 2011 front month May 11 London wheat was GBP206.00/tonne, by the end of June it was GBP155/tonne. The May/Nov spread saw Nov at a GBP34.00/tonne discount to May on the first trading day of May 2011, by the time May went off the board that gap had fallen to GBP11.50/tonne and before May was out the new front month old crop Jul 11 was trading at a discount to new crop Nov 11.

The much more liquid market that is Paris wheat is clearly a better barometer of what is really going on in the market. May 12 ended the week EUR2.25/tonne lower than it began it and Nov 12 fell EUR3.25/tonne.

Brussels only issued soft wheat export licences for 84 TMT this week, a lower weekly volume than that we have only seen once in the entire marketing year.

UK and EU weather conditions in general have improved significantly over the past week, that will hopefully mean that crop prospects will be enhanced for the 2012 harvest. It should perhaps be noted that this improvement comes a month earlier than it did in 2011.