UK Inflation Higher Than Expected
22/03/11 -- New this morning that UK inflation increased from 4.0% in January to 4.4% in February, beating the markets' expectations of a 0.2% rise, is behind the pounds' new lease of life.
Merv the Swerve will have to get his pen and paper out again to write his "sorry" note to the Chancellor for exceeding the BoE's 2% target for the fifteenth month on the trot no less.
Retail Price Index inflation - which includes mortgage interest payments - rose to 5.5% (from 5.1% in January). That's now the highest rate in 20 years and makes the prospect of an interest rate rise before too long look a bit more likely.
The pound has broken through resistance around 1.6330 against the US dollar and is currently banging on the door of 1.64, a level not seen since Jan 2010 fourteen months ago.
More Gossip
22/03/11 -- What little wheat UK farmers do have to sell is being locked in the barn for a rainy day I hear. Compounders are reporting it being difficult to prise spot wheat out of sellers gnarled and sweaty "bunch of carrots" mitts for collection in the next week or two.
This isn't necessarily because they've fallen in love with the notion that ex-farm wheat at anything that doesn't start with a "2" is giving it away, but more to do with the fact that they don't want to cash in any more chips in the current 2010/11 tax year, I am being told.
The spot price of Range Rovers has gone through the roof then I suppose?!
Breaking News
22/03/11 -- Twitter has just gone over capacity as reports circulate that a US warplane has been shot down over Libya. The BBC is reporting one has "crash landed" but that their is no evidence it was shot down at this stage.
From an economic viewpoint, also being reported on Twitter "each Tomahawk cruise missile costs roughly $1 million" and "we fired 100+ of the buggers over the weekend - do the math."
Maybe that's one reason why the dollar is weak today, the grain markets seem a bit spooked too.
EU/Western Russia Weather
22/03/11 -- Here's a stitched together map of the rainfall forecast for the EU and Ukraine/Western Russia/Kazakh for the next seven days from the excellent Martell Crop Projections. Looks like it's staying dry for most of the UK, northern France and central/western Germany but welcome moisture in most other places:
Chicago Close
21/03/11 -- Soybeans: May 11 soybeans closed at USD13.63, up 1/2 cent; Nov 11 Soybeans closed at USD13.45, up 11 cents; May 11 soybean meal closed at USD366.40, down USD1.50; May 11 soybean oil closed at 55.88, up 11 points. Celeres said that Brazil's harvest advanced considerably in the past week from 30% to 44% done. Argentina’s Ag ministry pegged soybean production there at 50 MMT. "Santa Fe and Cordoba crops received beneficial rainfall amounts of up to 1.2 inches last week. Soybeans filling pods will benefit, and more rain is in the 7-day outlook, which may be heavy up to 2.5 inches in Santa Fe, Entre Rios," say Martell Crop Projections.
Corn: May 11 corn closed at USD6.86 1/2, up 3 cents; Dec 11 corn closed at USD6.09 1/2, up 11 cents. Argentina’s Ag ministry pegs corn production there at 20.8 MMT. For all the talk of US corn sales to China all we have to go on is sales of 116,000 MT to "unknown" last Thursday and again similar today. Sales of 1-2 MMT is what the trade chatter suggests, but as each day passes without official confirmation from the USDA this looks more and more unlikely. Weekly corn export inspections of 29.503 million bushels were a bit below trade estimates.
Wheat: May 11 CBOT wheat closed at USD7.21, down 2 cents; May 11 KCBT wheat closed at USD8.42, down 3 cents; May 11 MGEX wheat closed at USD8.69 1/4, up 1 3/4 cents. USDA export inspections of 25.749 million bushels were in line with expectations. "US hard red wheat area remains hot and dry in the Southern Plains. Wheat is deteriorating without rain to compensate and there is no precipitation in the 7-day forecast," say Martell Crop Projections. Elsewhere the North China Plain wheat received welcome rain of 0.40 to 1.2 inches over the weekend, the first moisture in 3-4 weeks," they add.
EU Wheat Closing Comments
21/03/11 -- EU wheat closed lower with Mar London wheat down GBP1.20 to GBP193.15/tonne and new crop Nov GBP4.05 easier at GBP159.25/tonne. May Paris wheat declined EUR5.75 to EUR226.00/tonne, with Nov down EUR4.00 lower at EUR203.50/tonne.
It was another choppy day, with Nov London wheat opening GBP2.65/tonne higher and trading within a GBP8.05/tonne trading range across the session. Volume was relatively light.
Last week's wild swings it seems have heightened traders' awareness of downside potential, both May and July London wheat set an intraday high of GBP200.00/tonne, but neither were capable of penetrating that level to push higher.
A firmer sterling and euro contributed to EU grains overall weakness.
EU wheat crops seem to have largely done OK without looking "bumper" across the winter, with the German Farm Cooperatives Association pegging production there at 24.6 MMT on Friday, up from 24.0 MMT in 2010.
Rapeseed output is seen down to 5.42 MMT from 5.73 MMT on the back of a "very cold winter and lack of snow cover in recent weeks," they said. Winter barley output is forecast at 7.92 MMT from 8.68 MMT and spring barley production at 1.61 MMT from 1.73MMT.
The US winter wheat crop is struggling, and the chance of a late season hard freeze this weekend in parts of Kansas won't help.
Early Vibe
21/03/11 -- The bulls are firmly back in the driving seat to start the week it would seem. Events over the weekend don't appear to have done too much harm, with the Japanese nuclear situation improving slightly and the UN strikes on Libya getting off to a reasonably good start.
Bullish, but with caution, is maybe the theme this morning. Certainly recent wild market fluctuations will have taken a lot of the gung-ho mentality away. Whilst money that was taken out early last week does appear to be coming back in again, sell stops will be in place for if and when the unpredictable comes along.
Spring is officially here and we are set for a fairly dry, warm and settled week ahead here in the UK. France could do with some rain, but the situation there is far from critical, yet.
Mar London wheat goes off the board on Wednesday, and with a current open interest of none there isn't likely to be an awful lot of action there over the next couple of sessions.
Nov11 London wheat opened GBP2.65/tonne higher early doors but has slipped away a little since then to currently stand GBP0.30/tonne lower. Paris wheat also opened in positive territory but has also turned red in the last fifteen minutes or so.
The Globex market is also drifting back off the overnight highs with beans up 2-4c, corn up 8-12c and wheat up 6-8c.
The pound is nudging 1.63 against the dollar again for the first time in a fortnight ahead of inflation figures due out tomorrow. If they're bad, and I think that they will be, then ideas that an interest rate rise is on the cards before too long will resurface.
Sources in Brazil's Rio Grande do Sul report that, unlike in Matto Grosso, conditions are "just perfect for levelling out the crop before harvest" and that "quite a lot of what they’re loosing in production in the center-west of the country is being made up for here."
