Front Month London Wheat Posts Largest One Day Gain Since July

Posted by Nogger - a legend in his own mind at 19:46 | Categorized as

15/01/13 -- EU wheat futures closed higher with Jan 13 London wheat up GBP5.00/tonne to GBP215.00/tonne, benchmark May 13 GBP2.50/tonne higher also at GBP215.00/tonne and new crop Nov 13 GBP1.25/tonne firmer at GBP186.75/tonne. Mar 13 Paris wheat was EUR3.00/tonne higher at EUR252.50/tonne. For London wheat this was the biggest one day gain for a front month since late July.

US wheat is gaining support from ideas that it has become cheap relative to corn. The Mar 13 wheat/corn differential was 136 cents two months ago. One month ago that had fallen to 84 cents and as of last night's close the gap was down to only 43 cents.

The substantial size of the fund short in wheat is also a supportive factor. Will they be willing to increase that short further, or are they more likely to use any dips as a buying opportunity? The latter seems to be what the trade is thinking, for the moment at least.

The latest customs figures available show that the UK exported less than 100 TMT of wheat in November, the lowest total for the month since 2001, according to Agrimoney.com.

Wheat imports in November meanwhile were 225 TMT, mainly from France, Germany and Poland. That means that 2012/13 imports have now topped 1 MMT and are thus already more than the volume shipped in during the whole of last season.

The proportion of home grown grain used in domestic flour, starch and ethanol production has fallen from around 89% in July to closer to 80% in November.

Meanwhile there's plenty of trade talk of potential crop damage to winter wheat in the US and Russia.

Morocco are looking for 160 TMT of durum wheat for April shipment. Their 2012/13 marketing year to date (to end Dec) grain imports are 3.23 MMT, up 23% on last season. Of that total wheat imports stand at 1.77 MMT, an increase of almost 25% on last year. Their main wheat supplier so far has been Ukraine (640 TMT), followed by France (480 TMT) and Canada (410 TMT).

They also imported 1.37 MMT of corn in the current marketing year, with 880 TMT of that total coming from Brazil.

Russia sold 61,603 MT of wheat from their intervention stocks in it's latest government sale, bringing the total sold since sales began on Oct 23 to 1.26 MMT.

Ukraine’s State Statistics Service pegged the final 2012 wheat crop at 15.76 MMT, down 29% versus 22.3 MMT in 2011. Corn output is seen 20.92 MMT, down a more modest 8% from 22.8 MMT in 2011. Barley production is said to be 6.94 MMT, down 24% versus 9.1 MMT in 2011.