Nogger's Blog

18/06/12 -- EU grains closed mostly higher with Jul 12 London wheat up GBP1.25/tonne to GBP176.25/tonne and Nov 12 GBP1.85/tonne firmer at GBP155.85/tonne. Even inactive Aug 12 Paris wheat managed to close EUR3.75/tonne firmer at EUR206.75/tonne, whilst Nov 12 was also EUR3.75/tonne higher at EUR207.50/tonne.

News that the pro-austerity New Democracy party came out top in the Greek elections on Sunday - albeit by a narrow margin - provided a short-lived boost to equities. That was quickly erased though as Spanish 10-year borrowing costs pushed above the widely regarded as unsustainable 7% level for a fresh eurozone era high.

Widely touted heavy weekend rains in the US largely disappointed, which saw the electronic Globex market trade higher throughout the day, with those gains increasing once Chicago began trading in the afternoon. That strength spilled over into European trade.

"Instead of very heavy rainfall, showers were light and scattered from a stronger-than-expected ridge of high pressure that stabilized the atmosphere and diminished rainfall," said Martell Crop Projections.

"Corn moisture needs are rising at the very same time that ground moisture is declining. Most corn is already in the rapid growth phase, due to early seeding dates. This is placing a tremendous demand on the soil for water," they added.

Meanwhile drought that originally began in Ukraine and southern Russia has now shifted eastward into the Volga Valley, Urals and Siberia, they say.

"This opened the door for increased rainfall in eastern Ukraine and southern Russia, and staving the tide of deterioration. At the same time, intensifying heat stress and drought is damaging prospects in Russia's vast spring grain belt. Wheat production may finish worse that the 53 MMT projected by USDA in June, already cut 3 MMT from the May estimate," they conclude.