Nogger's Blog

25/07/12 -- EU grains finished sharply higher with Nov 12 London wheat up GBP6.95/tonne to GBP187.25/tonne and Nov 12 Paris wheat EUR9.50/tonne firmer at EUR260.50/tonne.

The grains did a pretty good job of reversing most of Tuesday's steep losses in a market that is becoming increasingly volatile.

Tensions were a little less fraught, with concerns over Europe calming somewhat, although it's clear that they could easily flare up again at a moment's notice.

Despite what is clearly going to be a significantly lower wheat crop in the region this year, offers of Black Sea wheat are still around, and competitive. Iraq bought 150,000 MT of Russian wheat in a tender it was revealed.

It would seem likely though that Black Sea offers will quickly dry up after an initial post-harvest selling spree. Talk of a Russian export embargo at some point in the not too distant future of the 2012/13 season abound, although it may be more likely for now that they may introduce export tariffs instead and see what good that might do to restrict foreign sales.

The euro was up off the lows of Tuesday today, although not by much and a sustained period of euro strength looks to be extremely unlikely for the foreseeable future. That could underpin cereal prices in Europe going forward, especially if matched by continued dollar strength.

That said, the not impossible chance of a complete Eurozone meltdown is probably still the most significant factor that could bring this market down yet. It should also be noted that there is a strong historical trend for Chicago corn and soybean prices to top out in July, the classic month to be at the height of a US weather market, although US weather markets this extreme don't come around too often.