There were signs as the year ended that the uncertainty over currency that’s been a dominating factor in the wheat market through 2011 may be fading. Even so, the euro has moved to lower values against the dollar, opening opportunity for European exporters.

U.S. Wheat Associates pointed out the bearish message of the 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 million tonnes to 209 million tonnes, the largest in 12 years,” it said. “Falling prices create an opportunity for buyers to lock in the best value for higher quality U.S. wheat classes than they have seen in a long time.”

The WASDE report gave its reasons for the changes.

“Another year of adequate to abundant precipitation across the 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 tonnes with higher expected harvested area and yields with recent improvements in late-season growing conditions.”

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 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 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-covering ahead of month, quarter and year-end provided market support, with traders looking to limit risk exposure as many prepare for the Christmas/New Year holidays.”

He also hinted that the big macro concern that has dominated thinking in grain markets over recent months could be starting to fade.

“Some easing of concerns about Eurozone debt took some of the recent gains off the market as investors were encouraged by positive German economic news and Spain’s ability to sell more debt than planned,” he said.

In its most recent Grain Market Report, which went out at the end of November, the International Grains Council (IGC) said that its index of grain export prices had gone to a 13-month low.

“The recent market downturn can be partly ascribed to bearishly perceived market fundamentals, as harvests neared completion in the northern hemisphere and work started south of the equator,” it said. “But it was also in reaction to deepening financial uncertainties, notably in Europe, affecting nearly all commodities. Heavy supplies of wheat amid strong export competition, including from new crop grain out of Argentina and Australia, mostly reduced fob values by between $20 and $30 over the past month, narrowing the gap with Black Sea quotations.”

Black Sea exports of wheat are moving, with Ukraine having landed wheat in Spain with another 300,000 tonnes expected in January, according to Lane.

He also noted that Russian grain exports had declined in November to 2.77 million tonnes and were projected to fall even more in December and January, and that U.S. wheat sales were expected to pick up starting February as Russian/Argentine wheat loses its competitive edge.

“Egypt bought French wheat for first time in 2011-12,” the U.K.’s HGCA reported on Dec. 19. “The 60,000 tonnes bought were part of 180,000-tonne purchase; other origins were Russia and Argentina,” it said. “French wheat priced at $240.50 per tonne (fob) was $3.50 per tonne cheaper than Russia.”

It noted that the euro had fallen by 9% since Sept. 1.