Nogger's Blog

29/12/11 -- EU grains ended with Jan 12 London wheat up GBP0.50/tonne to GBP151.50/tonne and Jan 12 Paris wheat EUR2.75/tonne higher at EUR203.25/tonne.

London wheat has now put on GBP10.50/tonne, or 7.4%, since the lowest close of the year set on December 10th. Paris wheat has gained EUR24.00/tonne, or 13.4%, in the same three week period.

European wheat is faring better much than it's UK counterpart partly due to the continued weakness of the euro, which fell to a more than 15 month low versus the dollar today after a disappointing Italian bond auction.

Italy raised a total of EUR7.5 billion in four auctions today, less than the EUR8.5 billion on offer and had to pay almost 7% on EUR2.5 billion of ten-year bonds. That's lower than last month but still close to unsustainable levels.

The ailing Mediterranean nation needs to refinance EUR330 billion worth of debt in 2012 alone, that's the equivalent of almost EUR6.5 billion each and every week next year. What could possibly go wrong?!

The weak euro should however help European wheat stay competitive on the export stage. Even so, the lion's share of yesterday's 250,000 to 300,000 MT optional origin wheat purchase by Algeria is expected to come from South America rather than it's normal favourite supplier - France.

Argentina has been making a bit of a name for itself as the world's cheapest supplier of wheat recently and it's expected that most if not all of yesterday's wheat may end up coming from there.

The markets remain in thin holiday mode, so it may be dangerous to conclude that we've finally broken out of the downwards trend that's been in existence now since April.

European leaders have been "on holiday" for much of this recent mini-rally, let's see what happens when the bickering resumes again in 2012.