Forget What Will Happen If We Vote To Leave Europe, What Will Happen If We Don't?

29/02/16 -- Yet again the weekend newspapers are full of "Brexit" talk and what it could mean for the UK economy, your mortgage, the cost of living and just about everything else.

It all smacks a bit of what do we print when there's not a lot of fresh news to me.

Whether you think a "leave" vote would be a good idea or not, what do YOU think the chances actually are of one being passed? Not that high huh? Me neither. You can currently get 9/4 from William Hill, which isn't bad in a two horse race.

If you cast your minds back to the Scottish referendum, the bookies were quoting an even more appealing 3/1 for a "Yes" vote back then, when the papers were also full of "too close to call" and "it's on a knife edge" speculation. Of course, as we now know, there ultimately was never much danger that they were going to be paying out on that one.

Despite the having the considerable weight of Boris behind the "Leave" campaign, I just can't see it getting voted through by the Great British Public, even if the papers still have almost 4 months to hype the thing up even more (although that isn't to say that they won't be at least partially successful in this task in the meantime).

So what does this mean for the pound, and more importantly the grain market? It seems that whilst the market is currently factoring in at least some, if not entirely all, of the "bad news" should we vote to leave, there's been little consideration given to the "stay" vote - and that's the bookie's 1/3 favourite.

UnoCredit are taking a step back from the hype and say that sterling could be in for a "blistering recovery" in the second half of 2016, assuming that we vote to stay in Europe (as they expect).

HSBC agree with them for what it's worth, and both have a GBP/USD exchange rate of 1.60 in mind for the end of the year.

That's more than 15% above where we currently languish.

If they're correct, and London wheat was simply to match the pound's subsequent rise in value versus the US dollar in the second half of the year, then LIFFE wheat would be under GBP100/tonne come November - a not unimaginable scenario, it is after all only a couple of quid away from being there on front month Mar 16.

Another reason to consider taking some of the hefty premium currently on offer for Nov 16 London wheat?

This is also 11.9% more than where May 16 currently trades. The Paris Dec 16 over May 16 premium is 8.4% by comparison and in Chicago it's only 6.8%. So why hang onto the one that's most out of sync with the others?

Because you're emotionally involved with London wheat? Because "things have to get better"? I hope things do get better, but sitting there with nothing sold on new crop when it is (and has been for some time) offering you a serious and logical reason to lock in a bloody good premium (even if not a nice profit) is more than a bit delusional.

And don't forget that Nov 16 has dropped a tenner since the turn of the year. That's ten pounds lost, not a fiver saved just because Mar 16 is down GBP15/tonne during the same period.