London Wheat Down To Lowest Since Late 2011 - Sterling Strength Weighs

Posted by Nogger - a legend in his own mind at 10:33 | Categorized as

31/01/14 -- It was a mixed end to a mixed week for EU grains - a week in which London wheat closed below GBP150.00/tonne for the first time on a front month since late 2011 and Chicago wheat hit it's lowest since July 2010.

Mar 14 London wheat closed GBP0.40/tonne lower at GBP149.50/tonne, whilst new crop Nov 14 was unchanged at GBP142.75/tonne and within spitting distance of the lifetime contract low of GBP140.00/tonne set earlier in the week.

Paris contracts by comparison had a jolly old time, with Mar 14 wheat closing EUR2.25/tonne higher at EUR192.50/tonne, rebounding from a mere 4-month closing low set on Wednesday. Mar 14 Paris corn up EUR1.25/tonne to EUR173.50/tonne and Feb 14 Paris rapeseed going off the board EUR2.50/tonne higher at EUR369.00/tonne.

For the week, London wheat lost GBP2.45/tonne on the front month, and GBP1.20/tonne on the Nov 14, whilst Paris wheat was only down a quarter of a euro. Paris corn rose EUR0.75/tonne and Paris rapeseed jumped EUR11.00/tonne.

Part of the reason for the better performance by Paris wheat to it's London and Chicago counterparts is euro weakness. The pound sits close to it's best levels in a year against the single currency, closing close to the 1.22 mark this evening. It also set a 32-month high against the dollar last week as some analysts begin to bring their forecasts for when UK interest rats will start to rise again to Q4 of this year.

The euro has also fallen from over 1.37 to less than 1.35 against the dollar during the course of this week.

Despite that decline, the USDA today reported the sale of 110 TMT of US corn to Spain - the second such sale of the week. One reason for that could be logistical problems caused by the deep freeze currently hitting the Black Sea, and/or maybe political turmoil and civil unrest in Ukraine. Reuters also reported today that the major Russian sea port of Novorossiisk was closed due to high winds, where gusts were reaching over 70 mph.

Whilst the pace of EU wheat exports remains strong, and that should be helped further by a weaker euro, the market is still fretting a little over Egypt's move to lower moisture levels on wheat imports to 13% - virtually ruling out this year's French wheat crop from making any further inroads into the world's largest wheat buyer. It maybe says something about how much wheat is offered on the international market when even cash-strapped Egypt can suddenly start to be fussy again.

A Reuters poll asking where Chicago wheat prices might end the year came up with an average trade guess of $5.73/bushel, which isn't much changed from where we are now at around 20 cents below tonight's close on the Mar 15 future - which will be the front month then.

In the week ahead there's not too much market news coming our way that we know of. Tuesday sees the release of the Stats Canada Dec 31st grain stocks report, and these are expected to be well up on year ago levels due to the bumper 2013 Canadian harvest. Thursday bring the UK cereals usage data from Defra. The big one is the USDA February world supply and demand report, that's due a week on Monday - Feb 10th.