EU Wheat Closing Comments

12/10/10 -- EU wheat futures were on the defensive for most of the day, with Nov London wheat closing GBP1.90/tonne lower at GBP164.25/tonne. Nov Paris wheat fell EUR2.75/tonne to EUR220.50/tonne at the end of the day.

Chicago wheat was lower in the overnight session, and still remains the weakest leg, although some support was garnered from firmer corn and soybeans.

London wheat also managed to find some support from the continued weakness of sterling.

The pound remains under pressure falling back below 1.14 against the euro and under 1.58 against the dollar. Sterling bulls are nervous ahead of next week's news from George Osborne, and probably rightly so. He will announce exact details of where the impending spending cut axes are to fall, and how deep they will go, on Weds 20th Oct.

Whilst we all know that bad news is coming, the temptation to get as much of it out of the way as early as possible could prove too difficult to resist. A slump towards the 1.10 level against the euro, an area not visited since March, could easily be on the cards if that is how the market interprets things.

That should however underpin London wheat at the expense of Paris, where open interest in November continues to gradually erode, falling beneath 100,000 lots yesterday for the first time in months.

French customs data shows that they exported 1.3 MMT of soft wheat in August, taking the cumulative marketing year so far (just the two months of July-Aug) to 2.7 MMT, 9% up on last year. An increase, but not exactly a torrid pace.