London Wheat Closes At 18-Month High, Within Sight Of Record

Posted by Nogger - a legend in his own mind at 09:16 | Categorized as

26/10/12 -- EU wheat ended mixed, but mostly firmer, to end the week with Nov 12 London wheat up GBP0.25/tonne to GBP209.50/tonne and with Nov 12 Paris wheat rising EUR1.50/tonne to EUR264.25/tonne.

For the week that places Nov 12 London wheat GBP5.25/tonne higher, whilst Nov 12 Paris wheat gained a more modest EUR1.50/tonne.

This also sets an 18-month highest closing level for a front month on the weekly chart for London wheat, which is now within GBP8.00/tonne of the all-time record closing high of GBP217.50/tonne set on 20 Apr 2011.

The market is also getting anxious about prospects for 2013, with plantings across western Europe delayed by soggy field conditions and forecasters now calling for Arctic weather to hit some areas this weekend. Nov 13 London wheat gained GBP7.50/tonne this week to close at GBP186.25/tonne, just below the lifetime contract high of GBP187.00/tonne set on Thursday.

Brussels issued 242 TMT of soft wheat export licences this past week, bringing the marketing year-to-date total to 4.9 MMT, up 9% on 4.5 MMT this time a year ago. Barley export licences are 31% up on year ago levels at 2.1 MMT.

International demand is clearly out there, and these sales come against a backdrop of aggressive Black Sea exports in Q1 of 2012/13, a factor likely to be largely missing for the remainder of the season - at least in the case of wheat.

Ukraine said that it's grain harvest is now 92% complete at 40.76 MMT, with average yields down 14% at 2.98 MT/ha. The corn harvest is ongoing, at 76% done, producing 14.47 MMT to date, which implies a final crop of around 19 MMT - not the 21 MMT that the USDA are expecting and a reduction of almost 17% on last year.

The Ukraine Ministry estimate corn exports at 12 MMT this season, half a million tonnes less than the USDA and 25% down on last year. They also confirmed this week that wheat exports will cease on 15 Nov.

Russia's Ag Ministry said that 99% of their wheat harvest is complete, producing 39.6 MMT - down 32.5 % from a year ago.

Argentina's wheat harvest is only 4% complete to date, hampered by rain which may cut yields and quality this year. The corn crop is only 37% planted against 55% normally for similar reasons, say the Buenos Aires Grain Exchange.

They estimate the Argentine wheat crop at 10.12 MMT, down 23% from 13.2 MMT a year ago and well below the USDA's forecast of 11.5 MMT.

Australia's wheat harvest is also underway, with early yields said to be pretty disappointing. Most private forecasts for wheat output Down Under this year are in the region of 19-21 MMT, versus 29.5 MMT last year and 23 MMT from the optimistic USDA.

Spain's National Statistic Institute say that Q3 unemployment there rose above 25% for the first time since 1976, with 52% of 16-24 year olds out of work.

Clearly this makes it increasingly difficult for the Spanish government to pay it's debts, increasing the likelihood of a bailout request. The market would view lending Spain more money with which to hang itself as a good thing.