Nogger's Blog

01/06/12 -- EU grains finished generally lower with Jul 12 London wheat ending down GBP0.60/tonne to GBP171.00/tonne, and new crop Nov 12 falling GBP0.40/tonne to close at GBP154.75/tonne. Aug 12 Paris wheat was unchanged at EUR208.00/tonne, whilst Nov 12 was EUR2.75/tonne lower at EUR208.75/tonne.

The pound was under pressure on news that British manufacturing activity shrank at its fastest pace in three years last month. That helped London wheat to suffer smaller losses than across the Channel.

On the week as a whole Jul12 London wheat fell GBP4.00/tonne and Nov 12 GBP4.75/tonne. Aug 12 Paris wheat shed EUR4.75/tonne and Nov 12 EUR7.75/tonne.

There are still pockets of old crop wheat kicking around on farm in the UK, with long-holders hoping for once more shot at a big payday. It should be noted that Jul 12 feed wheat at GBP171.00/tonne is the equivalent of EUR212.00/tonne, so export interest is going to be zero at these levels.

There's also said to be more than 100,000 MT of wheat sat in futures stores in the UK. Given that new crop off the combine is running at around a GBP30.00/tonne discount to old crop, carrying the latter to the wire is a risky strategy.

As far as new crop is concerned, the life-saving April/May rains mean that the UK cereal crop has good potential, although they also bring increased disease risk, say the HGCA.

Meanwhile FranceAgriMer raised their estimate on the proportion of the soft wheat crop there rated good/excellent to 70% today, very substantially better than just 24% this time last year. Both winter barley and spring barley ratings were also increased to 65% and 83% good/excellent respectively. Corn good/excellent also improved, jumping five percentage points from 64% last week to 69% this time round.

Harvest pressure will be upon the French market by the middle of the month, the first winter barley of 2011 had already been cut before the end of May this time last year. With EU wheat exports lagging year ago levels by almost a third, carryover stocks into 2012/13 may be larger than was anticipated. FranceAgriMer recently raised their estimates on 2011/12 French ending stocks for both wheat and barley due to lower exports than expected.

The harvest should also be underway in the south of Russia and Ukraine by the end of the month too. We may have a clearer idea of what the impact has been of the recent arrival of rain will be by then. In the south of Russia wheat is said to be generally very short, much as it was here in the UK twelve months ago, although it will be remembered that we still ended up with surprisingly good yields here.

I see no reason why the normal Eastern European marketing strategy of "if it's been combined, sell it" shouldn't prevail again this year, which is likely to depress the world market in the first half of the 2012/13 campaign.