Nogger's Blog

19/09/12 -- EU grains ended higher with Nov 12 London wheat GBP1.25/tonne firmer to close at GBP206.35/tonne and with Nov 12 Paris wheat EUR2.00/tonne higher at EUR261.00/tonne.

European markets followed US grains higher after two days of steep losses on what appeared to be "bargain hunting" - if you can call London wheat within GBP2.00/tonne (as of last night's close) of a near 17-month closing high a bargain.

It is interesting to note that open interest in nearby Nov 12 London wheat has almost halved in the past 4/5 weeks. That seems to be a function of nervous shorts getting out, as they aren't confident that they retain the ability to come up with enough wheat of sufficient quality to make delivery against those sales, should they so chose.

Russia's Ag Minister has narrowed his 2012 grain harvest estimate to 72-73 MMT. With 63 MMT already in the bin off 76% of the planted area, that would appear to suggest an abandonment rate of around 10% this year.

Full season 2012/13 exports remain forecast at 10-14 MMT, despite the fact that 6.1 MMT has already been shipped out between Jul 1 and Sep 12th.

Egypt has gone quiet after a flurry of recent wheat purchases. Their next tender will be interesting as Russian offers rose to parity, to even a slight premium over French quotes in their last tender. We may have to wait a while for that as Egypt now say that they have almost 7-months worth of supplies following last week's purchases that went as far forward as Nov. 21-30 shipment.

The Russian government seem determined not to undermine their recently WTO membership by attempting to restrict foreign wheat sales. It may be that sales have been so strong in the first quarter that the trade will regulate itself in the months ahead as supplies within easy striking distance of the Black Sea run dry.

Separately, reports continue to suggest that Russia may import up to 2 MMT of Kazakh wheat in 2012/13.

Elsewhere, the Canadian government pegged wheat production there this year at 27 MMT, up 0.3 MMT from last month and a 7% increase on last year.

Corn output is forecast 11.4% higher at 11.7 MMT, with Canada expected to be a net exporter rather than an importer in 2012/13. Barley production is seen increasing by almost 23% to 9.51 MMT.

Continuing with that theme, they have rapeseed output at a record 15.4 MMT, almost 1 MMT more than a year ago, whilst Oil World go one step further pegging production at 15.7 MMT. The latter place world OSR output at 62.4 MMT vs 59.8 MMT last year, having recently raised their estimate on EU-27 production from 18.0 MMT to 18.9 MMT, although still slightly below last season's 19.2 MMT.

The predicted emerging El Nino weather signal seems to be weakening. "Argentina is soaking wet in the wake of heavy August-September rainfall. Rainfall has been from 3 to 6 times the normal value in the past 6 weeks. Soaking rains needed to replenish parched fields were viewed as positive, to begin with, but now have turned into too much of a good thing," say Martell Crop Projections.

Meanwhile, "frost and freeze conditions are predicted Sunday morning in the northern United States affecting Iowa, Minnesota, Wisconsin, Nebraska and the Dakotas. Ordinarily, freezing temperatures this early in the fall would be a cause for concern in the Midwest. Not this year, however. Severe summer drought and heat stress has rushed development causing premature ripening," they add.