EU Wheat Closing Comments

Another volatile trading session saw November London wheat close GBP6/tonne lower at GBP152.00/tonne, with November Paris wheat ending down EUR14/tonne at EUR209.50/tonne.

Whether the market has topped or if this was just pre-weekend profit-taking remains to be seen. End users are left short and caught by the suddenness and magnitude of the recent rally. Whilst some will certainly be scaling back on their usage, that isn't an option for everyone.

The Russian ban on exports comes into place in next weekend, and although some reports suggest that around a million tonnes of grain will be exported between now and then, others say that force majuere is already being claimed by some exporters.

Meanwhile, although Ukraine is officially saying that it hasn't put export restrictions in place (and to comply with WTO rules they can't), unofficially it would seem that sufficient volumes of red tape have been put in place to effectively block grain from leaving the country.

That's two of the world's cheapest sellers shutting up shop, and there are reports that a third, Kazakhstan, is being "encouraged" by Russia to do likewise.

At home all the grain merchants I am talking to are reporting getting wheat offered to them at a phenomenal pace. The problem that they have is hedging it effectively and efficiently with margin calls becoming "crippling".

Open interest in November Paris wheat continues to run well in excess of 6 MMT, reputedly more than six time the grain storage capacity in the whole of Rouen. If the longs decided that they actually wanted to take delivery of their contracts, there isn't in fact sufficient authorised futures storage capacity in the port to make anything like that volume available!