World Grain - January 2012 - 20

GRAINMARKETREVIEW

Wheat
Weak euro hands the advantage to Europe
by Chris Lyddon

Global wheat ending stocks
(in 1,000 tonnes)

250,000 200,000 150,000

There were signs as the year ended that the uncertainty over cur- 100,000 rency that’s been a dominating factor in the wheat market through 2011 may be fading. Even so, the euro has moved to lower values 50,000 against the dollar, opening opportunity for European exporters. U.S. Wheat Associates pointed out the bearish message of the 0 USDA’s World Agricultural Supply and Demand Estimates Report. “A quick look at the new 2011-12 forecasts tell the story: global wheat production up to a record 689 million tonnes with higher production in Australia, Argentina and Canada; global wheat supplies up 9.3 million tonnes to 889 million tonnes; global wheat ending stocks up 5.9 mil- *Projected lion tonnes to 209 million tonnes, the largest in 12 years,” it said. “Fall- Source: U.S. Department of Agriculture Average wheat price received by farmers in U.S. ing prices create an opportunity for buyers to lock in the best value for (in dollars per bushel) higher quality U.S. wheat classes than they have seen in a long time.” 10 The WASDE report gave its reasons for the changes. “Another year of adequate to abundant precipitation across the 9 country’s southern and eastern growing areas and a recovery in production in Western Australia pushes production to a record 28.3 million tonnes,” it said. “Argentina production is raised 1.5 million 8 tonnes with higher expected harvested area and yields with recent improvements in late-season growing conditions.” 7 The USDA also added 1.1 million tonnes to Canada’s crop on the basis of the latest estimate from Statistics Canada and put 900,000 6 tonnes on China’s production on the basis of a recently released estimate from China’s National Bureau of Statistics. In a report released on Dec. 22, Jonathan Lane, trading manager 5 at U.K. exporter Gleadell, noted that grain markets “have seen sharp support from dry conditions in South America, mainly impacting potential corn and soybean crops.” “Lower crops would support the potential of increased export from the U.S. later in the season,” he said. “In addition, short-cover- Note: Latest data may be preliminary or projected Source: U.S. Department of Agriculture ing ahead of month, quarter and year-end provided market support, with traders looking to limit risk exposure as many prepare for the Black Sea exports of wheat are moving, with Ukraine having landChristmas/New Year holidays.” ed wheat in Spain with another 300,000 tonnes expected in January, He also hinted that the big macro concern that has dominated think- according to Lane. ing in grain markets over recent months could be starting to fade. He also noted that Russian grain exports had declined in Novem“Some easing of concerns about Eurozone debt took some of the ber to 2.77 million tonnes and were projected to fall even more in recent gains off the market as investors were encouraged by positive December and January, and that U.S. wheat sales were expected to German economic news and Spain’s ability to sell more debt than pick up starting February as Russian/Argentine wheat loses its complanned,” he said. petitive edge. In its most recent Grain Market Report, which went out at the end “Egypt bought French wheat for ﬁrst time in 2011-12,” the U.K.’s of November, the International Grains Council (IGC) said that its HGCA reported on Dec. 19. “The 60,000 tonnes bought were part of index of grain export prices had gone to a 13-month low. 180,000-tonne purchase; other origins were Russia and Argentina,” it “The recent market downturn can be partly ascribed to bearish- said. “French wheat priced at $240.50 per tonne (fob) was $3.50 per ly perceived market fundamentals, as harvests neared completion tonne cheaper than Russia.” in the northern hemisphere and work started south of the equator,” It noted that the euro had fallen by 9% since Sept. 1. it said. “But it was also in reaction to deepening ﬁnancial uncertainties, notably in Europe, affecting nearly all commodities. Chris Lyddon is World Grain’s European editor. Heavy supplies of wheat amid strong export competition, includHe may be contacted at: chris.lyddon@ntlworld.com. ing from new crop grain out of Argentina and Australia, mostly reduced fob values by between $20 and $30 over the past month, We want to hear from you — Send comments and inquiries to worldgrain@sosland. com. For reprints of WG articles, e-mail reprints@sosland.com. narrowing the gap with Black Sea quotations.” 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12* Dec. 2010 Jan. 2011 February March April May June July August September October November
20 January 2012 / World Grain / www.World-Grain.com

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