EU Wheat Closing Comments - Monday

EU wheat futures closed higher Monday with London January feed wheat ending up GBP1.25/tonne at GBP108.00/tonne, and Paris January milling wheat up EUR1.25/tonne at EUR134.25/tonne.

Firmer US markets, fund buying and outside influences helped push EU prices higher, but this has nothing to do with the fundamentals, we are awash with wheat - at least that's what most people are saying.

World wheat consumption will be a record large 648 MMT in 2009/10, say the USDA. There are already question marks over 2010 output in the world's top two producing nations of China and India.

Production in Argentina looks set to be the lowest since 1977, and output in Australia is also getting downgraded. Planting in America is behind schedule, and 60% of the newly planted Ukrainian wheat crop is rated no better than satisfactory.

In the UK, we have new demand kicking in from Ensus on Teesside in January, plus Vivergo later in 2010. In addition to that, Hovis have announced that they will be switching their entire 1.4 MMT/year of wheat milling to 100% home-grown grain in 2010. UK market leader Wharburton's have said that they will also be launching a loaf made from 100% UK wheat by March 2010. Hovis and Wharburton's account for 56% of UK bread sales.

Egypt split last week's wheat tender three ways between France, Germany and Russia. Russian and Ukrainian wheat is starting to run out of favour due to significant bug damage, and the Russian winter is about to kick off in earnest. That will bring a new whole host of logistical problems to physically export Russian wheat.

Erm, there's one or two fundamentals in there I think you might find.