Nogger's Blog

21/12/15 -- EU grains closed mixed in what already looks like being a typically uneventful and thin Christmas week.

At the close of trading, Jan 16 London wheat was down GBP0.40/tonne at GBP112.00/tonne. In Paris, Mar 16 wheat was down EUR1.50/tonne to EUR174.75/tonne, Jan 16 corn fell EUR0.50/tonne to EUR159.00/tonne and Feb 16 rapeseed rose EUR2.00/tonne to EUR375.50/tonne.

As far as wheat goes, if you forced me to put money on it right now, then mine would go on more of the same between now and Thursday - a further grind lower. We might see a change in the following holiday-shortened week between Christmas and New Year as fund money banks some profits and squares up the books a little ahead of year-end. That could see some modest late-year upside, but a direction changer it's unlikely to be.

Once we get into the New Year it may be unlikely that the wheat market might move significantly higher without the aid of some outside catalyst - and what that might be we probably don't really know what that is (if it exists at all) right now. Current "worries" over Russian/Ukraine winter grain crop health (or the lack of it), won't be anything like properly quantifiable until well into the spring.

As mentioned on numerous occasions before, we also need to keep an eye on exchange rates. Luckily, analysts seem generally be in line with what they expect the "usual suspects" to do - in the first quarter of 2016, if not at least until the second. Further forward of that, but perhaps not surprisingly, the waters muddy a little unfortunately. Just like the weather, the further forward you go the lower the degree of forecaster certainty there is when it comes to currency movements it would seem.

The current consensus indicates a strong dollar, a moderate pound and a weak-ish euro. That tentatively suggests wheat prices doing pretty much the same across the next 6 months as they have in the last, with Paris performing the best of the wheat markets - if not exactly setting the world on fire - and Chicago wheat the worst with the London market caught somewhere between the two.

The other thing that warrants keeping an eye on going forward is the old crop/new crop (and even far flung new crop 2017 too) premiums. Whilst the old crop/new crop London wheat premium is currently rather wide, I wouldn't rule out it getting even wider yet (not that means at all that Nov 17 will go up). Similar comments might also apply to Paris wheat and also comparisons the even larger premiums on offer for the 2017 harvest too.

As far as other fundamentals go, at this stage it looks like the world will plant/has already sown largely the same wheat area for the 2016 harvest as the one just passed.

The German Stats Office estimate little alteration to winter wheat plantings at 3.22 million ha, with winter barley sowings up 35 at 1.3 million ha. Various private estimates have UK wheat plantings relatively unaltered for the 2016 harvest too.

France meanwhile is expected to plant even more wheat than it did for this year's ultimate record 41 MMT soft wheat crop - an 80 year high in sown area in fact.

Strategie Grains see overall EU-28 winter wheat plantings little changed compared with 12 months ago at 24 million ha.

Ukraine said that their winter grain plantings for the 2016 harvest were 11.4% down on a year ago at 7.1 million ha, and that OSR sowings had fallen 26.5% to 650k ha. Additionally only 86% of these winter grains and 87% of winter OSR have so far emerged. Further downgrading production potential in 2016, only 67% of winter grains and 68% of winter OSR are in good to satisfactory condition.