EU Grains Close - Tuesday

25/09/12 -- EU grains closed mixed with Nov 12 London wheat down GBP0.85/tonne at GBP204.10/tonne and Nov 12 Paris wheat up EUR0.75/tonne to EUR261.25/tonne.

Lack of fresh news was today's problem, with harvest pressure in the US keeping a lid on potential price rises, as the market continues to trade sideways. Nevertheless, London wheat is within sight of the recent 17-month front month closing high of GBP207.00/tonne and Paris wheat isn't too far away from a similar EUR269.25/tonne high.

All things considered that isn't a bad performance, especially considering that recent customs data released last week shows that July UK wheat exports were 71% down on year ago levels at less than 34 TMT. In contrast, barley exports were up 25%.

This is a very similar situation to wheat we are seeing on the Continent. EU wheat exports were down 13.3% to 2.54 MMT last week, yet barley exports are up 83.3% to 1.65 MMT.

So, for London wheat to be within a few pounds of the recent highs is an impressive performance, what could it do come the spring then we ask ourselves?

Dryness concerns as far as winter wheat plantings in the UK are concerned have eased following a month's worth of rain in the past 48 hours, say the Met Office.

RAF Leeming in North Yorkshire picked up 64mm of the wet stuff in the 24 hours to 10am this morning, the wettest for September since records there began in 1945.

Internal Russian wheat prices have reportedly shot up in recent weeks, with 4th grade wheat in Siberia apparently at a post-Soviet era record 11,200 roubles, according to the Vedomosti Daily. That's around GBP222/tonne or EUR279/tonne, and Siberia is a very long way from the Black Sea.

Talk of some form of Russian export ban and/or tariffs persist, although it seems that if prices continue to rise at this rate (up 1,000 roubles in the past week alone) then one won't be needed.

On the international front, Algeria seeks 50 TMT optional origin wheat for November shipment, whilst Iraq are tendering for 50 TMT of optional origin wheat, having bought Russian wheat in a similar tender a week ago. Taiwan also seeks 50,500 TMT of US wheat for November shipment.

Some analysts now estimate Australia’s 2012/13 wheat crop at below 20.0 MMT versus ABARES estimate of 22.5 MMT and the USDA's 26.0 MMT due to dry weather in Western Australia state.

In the US, wheat farms in the Southern Plains are expecting heavy, soaking rains in the coming days, say Martell Crop Projections.

"The chances for rain are very favourable in Kansas, Oklahoma and West Texas the next few days. Rainfall is expected to be near 1.25 inch in the 3 top hard red winter wheat states. An unstable front is developing on a horizontal slant from southern Kansas eastward through Missouri and the Ohio River Valley. This would be the focus of on and off showers the next few days," they add.