EU Wheat Close

Nov London wheat ended GBP0.70 easier at GBP161.30/tonne, with Nov Paris wheat EUR3.50 lower at EUR220.50/tonne.

London opened around GBP3 higher, with Paris EUR2-3 firmer, but prices just couldn't hold at those levels and slipped away as the day wore on. A weak opening by Chicago wheat sent prices into negative territory towards the end of the session.

The large volume of open interest in Nov Paris wheat appears to be undermining the front month contract. The inverse keeps continuing to erode, with the Nov/Jan spread down to EUR1.25/tonne at the close, and Nov/Mar narrowing to EUR2.75/tonne.

The bull run seems to be waning, the Paris market simply isn't liquid enough to cope with open interest of more than 120,000 lots in front month November it would seem.

The strong euro and weak US dollar are also capping gains.

There's still some bullish information filtering through from the supply side, but current prices seem to be rationing the demand side of the equation too.

German trading house Toepfer pegged the wheat crop there at 23 MMT, 0.4 MMT down on their August estimate and 2.2 MMT below output in 2009. Coceral are a bit more optimistic estimating 23.8 MMT. Toepfer said that some of the crop in the north won't even make feed grade and will be suitable only for biogas production.

The world wheat crop will come in at 643 MMT, 2.7 MMT down on last month's estimate and 37.3 MMT down on 2009, said Toepfer.

Coceral pegged the UK wheat crop at just 14.4 MMT on Friday, similar to last season despite a 6% increase in planted area.