EU Wheat Falls Following Monti Resignation

10/12/12 -- EU grains closed mostly lower with Jan 13 London wheat down GBP2.75/tonne at GBP221.75/tonne, May 13 down GBP1.80/tonne to GBP225.70/tonne and new crop Nov 13 GBP1.25/tonne easier at GBP197.25/tonne. Jan 13 Paris milling wheat fell EUR2.25/tonne to close at EUR266.50/tonne.

This was the lowest close for front month Jan 13 London wheat in a fortnight. European jitters returned following the weekend's surprise announcement from Italian Prime Minister Mario Monti that he was going to resign, putting the euro under renewed pressure. Who will replace him, and how anti-austerity are they likely to be, the market is wondering.

European Council President Herman Van Rompuy said that he hopes "that the policies he (Monti) put in place will continue after the elections." These are now expected to be in February.

Iraq reportedly bought 350,000 MT of Australian and Romanian wheat over the weekend. In addition, Saudi Arabia bought 295,000 MT of hard wheat from the EU, Australia and the US in a weekend tender.

The USDA reported the sale of 115,000 MT of US wheat to Egypt under the daily reporting system. Jordan and Syria are also tendering for wheat indicating that international demand remains strong even at current levels.

It is widely considered that Russia and Ukraine are now more or less sold out of wheat and recent tender results would appear to confirm this. EU exports meanwhile are 21% up on year ago levels, and there is some talk that Europe too could be out of wheat to export by the time spring gets here.

Other interesting weekend developments included a report in an Argentine newspaper, La Nacion, that the government there is to cap wheat exports in 2012/13 at 4.5 MMT due to sharply lower production this year due to widespread heavy rains and flooding.

Some media reports suggest that "several" ships loaded with new crop wheat are currently being held at port in Argentina because they are unable to secure the necessary export papers.

Worries persist concerning the health of US winter wheat meanwhile. "Cool temperatures are slowing wheat growth, and the crop is pushing into dormancy in many areas. Very cold temperatures this morning resulted in some spotty winterkill across west central NE and east central CO, as readings there dropped below 0 F. However, less than 10% of the wheat was affected, and readings should now moderate the rest of this week," said MDA CropCast.

Ukraine's corn crop is now 98% harvested, with an output of just under 20 MMT in bunker weight, giving total grain production this year of 46.3 MMT versus 57.7 MMT in 2011 - a drop of nearly 20%.