Month End Poses Same Old Questions For London Wheat

31/03/16 -- EU grains closed mixed. A stronger sterling had London wheat under pressure relative to Paris grains.

News that the UK economy grew 0.6% in Q4 of 2015, topped expectations of 0.5%, was seen as a bit friendly for sterling.

The May16/Nov16 London wheat spread closed at GBP13.70/tonne, having begun the month at GBP12.60/tonne - last summer they were running at parity.

"Gains for UK Nov'16 wheat futures earlier this week brought the contract within GBP3.50/tonne of the post-planting average as at Tuesday’s close. This is the closest the contract has come to the post-planting average since mid-January. Although prices have dipped away again since, they remain nearer the average than through much of February and March," noted the HGCA's Arthur Marshall.

That continues to pose the question "is new crop a sell at these levels even if they are below the cost of production?"

Many UK growers' attitude to that would be "I'll only see at below cost when I absolutely have to, not to simply lock in a guaranteed loss." Although they might concede that this is a strategy that hasn't been too successful for them of late.

Selling Nov16 London wheat on the last day of 2015 would have got them a sale at more than GBP8/tonne above tonight's close on the Nov16 future. That's not as bad as a GBP13.50/tonne loss that they would have incurred on selling the May 16 instead, but it's still a loss at the end of the day.

It also probably now means that they still have BOTH the May 16 and Nov 16 to sell.

It is also worth considering that Russian and Ukraine farmers might view the situation differently. Their local currencies are even weaker than the euro for one, making selling at these levels not quite so punitive in rouble of hryvnia terms. They will therefore likely be eager sellers for Nov 16 whether we are or not.

Ukraine said today that spring barley plantings there are now 49% complete on 954k ha. French spring barley was 98% sown as of Monday versus 90% done a week previously. Emergence of the latter is 24%, with 6% of the crop tillering.