London Wheat Continues To Punch Above It's Weight

17/08/12 -- EU grains ended mixed, although wheat was higher with Nov 12 London wheat up GBP1.50/tonne to close at GBP200.25/tonne and with Nov 12 Paris wheat EUR3.00/tonne firmer at EUR262.75/tonne.

For the week Nov 12 London wheat added GBP4.25/tonne, whilst its Paris counterpart shed EUR1.25/tonne. London wheat continues to punch well above it's weight, aided this week the the announcement of the imminent re-opening of Ensus and an uncertain outlook for UK yields this year. May 13 London wheat closed at GBP202.75/tonne, the equivalent of roughly EUR257.50/tonne. May 13 Paris milling wheat closed just EUR1.50/tonne higher than that.

Nov 12 London wheat set a lifetime contract high of GBP201.00/tonne today, and also closed above GBP200.00/tonne for the first time for a front month in almost 15 months. And all this in the middle of harvest!

Talking of which, that has stalled this week following a period of widespread and heavy rain but should pick up again this weekend, particularly in the south east. If the forecast holds true then we could be in for the warmest weekend of the year, particularly in the south east.

Maybe we will have a better handle of UK wheat yields next week, but for now hopes aren't high. Quality wheat looks like it will be hard to find, with full spec milling premiums, only a fiver a few old crop months ago, now in the mid-30's over feed for new crop.

The trade is almost universally bullish. Russian traders are exporting grain like there's no tomorrow, and for them there possibly isn't. At least there may be no export trade tomorrow with a second export embargo in three season's surely looming.

They're expected to export 2.5-3.0 MMT of grains this month, to add to the 2.1 MMT shipped out in July. Rusagrotrans have cut their 2012/13 full season grain export estimate to 12 MMT. With a further 3.0-3.5 MMT of grain predicted to be exported in September, that would bring Russia's 2012/13 Q1 exports alone to around 7.6-8.6 MMT.

Meanwhile the European debt crisis has been pushed to the back of traders' minds following the Draghi "whatever it takes" comments. German Chancellor Merkel said yesterday “Germany is committed to do everything we can in order to maintain the common currency.”

Brussels issued 290 TMT of soft wheat export licences this week, bringing the cumulative 2012/13 marketing year total so far to 1.3 MMT.