Sterling Slump Saves London Wheat Friday, But Will It Last?

15/01/16 -- EU grains traded mostly lower, save for London wheat which garnered some support from a weak sterling - briefly falling below 1.30 against the single currency to levels not seen in a year.

At the finish, Jan 16 London wheat was up GBP1.35/tonne at GBP109.60/tonne, Mar 16 Paris wheat was down EUR1.00/tonne to EUR165.25/tonne, Mar 16 corn fell EUR0.75/tonne to EUR155.00/tonne and Feb 16 rapeseed slumped EUR4.50/tonne to EUR357.25/tonne - the lowest on a front month since August.

For the week overall, that puts nearby London wheat GBP1.40/tonne lower, with the Paris market down EUR6.25/tonne, corn losing EUR5.75/tonne and rapeseed working its way EUR9.50/tonne easier.

For the week, the London spreads have firmed, with May16/Nov16 wheat closing at GBP8.50/tonne versus GBP7.65/tonne a week ago.

The pound has worked lower this week, following news that UK industrial output fell 0.7% in November - the largest monthly decline since Jan 2013. Analysts are still divided as to what the future holds for sterling though, with Lloyds suggesting that the GBP is now oversold and that the potential for a recovery back towards 1.40 could be on the cards. One poll of leading banks forecast a GBP/EUR exchange rate close to 1.44 by the end of March, and we're almost 10% lower than that level tonight.

The FTSE 100 fell 2% today, and Brent and NYMEX crude both closed below $30/barrel (and Brent fell under $29/barrel at one stage to 12-year lows), as Chinese jitters continue to unsettle the global economy.

The slump might not be over yet some are still warning, with the West set to ease sanctions against Iran, flooding the international market with yet more crude oil it doesn't want.

Brussels reported that they'd released a respectable 754 TMT worth of soft wheat export licences this past week, with France commanding a 29% share of that total. That takes the season so far total to 13.51 MMT. Whilst that's down 12% compared to this time last year, it's a lot better than it was - export licence totals were 23% lower at the end of November for example.

Barley export licences this week came in at 164 TMT, with 21% of that going to France. Season to date barley licences are now 5.72 MMT, up 29% versus this time last year (versus +17% at the turn of the year).

The EU Commission meanwhile also announced that they'd approved 31% (over 285 TMT) worth of duty free Ukraine wheat imports into the UK out of a special quota to allow 950 TMT of wheat into the Union un-taxed.

Jordan said that they'd bought 50,000 MT of feed barley for Feb shipment in a tender, paying $199/tonne C&F.

Morocco said that they'd decreased wheat imports in 2015 by almost a third due to growers there gathering a record 8 MMT harvest last year.

Ukraine said that they'd exported almost 22.5 MMT of grains already so far this season, a 15% increase compared with the same period a year ago. That includes 10.63 MMT of wheat, 3.92 MMT of barley and 7.81 MMT of corn.

As the frenzy to place wheat on the market increases, there are reports today of two cargoes of Argentine wheat heading for the US port of Wilmington in North Carolina next month following the recent Argentine government's relaxation on export duties and quotas.