EU Wheat Follows America Lower As Funds Exit

Posted by Nogger - a legend in his own mind at 09:37 | Categorized as

16/11/12 – EU grains closed generally lower with Nov 12 London wheat down GBP2.00/tonne at GBP215.00/tonne, with benchmark May 13 GBP1.10/tonne lower at GBP220.75/tonne and new crop Nov 13 down GBP1.50/tonne to GBP187.50/tonne. Jan 13 Paris wheat ended unchanged at EUR269.25/tonne.

For the week that puts Nov 12 London wheat GBP5.75/tonne lower, May 13 down GBP6.25/tonne and Jan 13 Paris wheat EUR7.75/tonne easier.

EU grains have followed America lower this week, with soybeans leading the way and dragging wheat down with it on fund liquidation, regardless of the fact that there are still plenty of bullish factors in the market for wheat.

Ukraine appear to have confirmed a Dec 1 wheat export ban, although they quickly rescinded similar restrictions set to begin on Nov 15 last month when Egypt rebuked them. Egypt's second half November purchases from Ukraine will be honoured and no more wheat will then be shipped until summer of 2013, that's the way the situation looks now at least.

It can only also be a matter of time before Russian wheat exports dry up, with demand seen switching to Europe. That may have begun to happen already judged by yesterday's announcement that Brussels had issued almost 700 TMT of weekly soft wheat export licences - the largest weekly total since September 2010 just after Russia had announced it's last export ban.

This year's Russian wheat crop is smaller than the one of 2010, as indeed is Europe's. Despite strong early season competition from the Black Sea this week's export licences bring the 2012/13 season's total so far to 6.4 MMT, more than 10% up on this time a year ago and production in Europe last year was 4% higher than in 2012.

EU-27 barley exports are also well ahead of last season at 2.3 MMT, an increase of nearly 28% on this time a year ago.

Meanwhile US wheat is heading into winter dormancy poorly established and in the worst condition it's ever been in and French and UK wheat plantings are well behind schedule and crops here too are looking pretty shabby.

For now however it would seem that the prospect of America falling off it's widely touted "fiscal cliff" carries more clout than any of the above within the speculative community. As we have seen before when they are all stampeding for the exits the market is only going to go one way regardless of the fundamentals.