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At the end of 2015 London wheat was down 14.5% on the year, Paris wheat -13.3%, European corn -11%, rapeseed was + 6.6%.
Last year saw large volumes of wheat carried over from 2014 into 2015; currently the carry from 2015 into 2016 is comparatively much bigger so there is the likelihood of again a big carryout subject space and financial constraints.
In previous years, when grain markets rally in the new year, it has been due to weather threats; weather is certainly making headlines. The difference to previous years is that stocks are much greater now offering ‘insurance’
NASA has forecast the current El Niño to be as bad as 1998. Excessive rainfall is a feature in many areas (South America, mid west, Europe etc) and France experienced second warmest Christmas day on record.
Cold weather is affecting Russia and Ukraine with temperatures reaching -20C in some areas. Recent snowfall may have arrived in time to prevent winterkill, 10 cm of snow is required to protect against -20C.
2016 Global economy / markets have so far not improved, Chinese share trading halted as 7% falls triggered ‘circuit breakers’.
Oil up on early trading today but Saudi Arabia is maintaining its production and stocks continue to build. The situation between Saudi and Iran could have an impact if tensions increase. OPEC plan to keep up production to try and make U.S shale gas industry struggle to compete. This tactic has not worked so far and US see shale energy as strategically important.
author: Joe Beardshaw