EU Grains Close Sharply Higher

18/05/11 -- EU grains soared Wednesday as dealers, consumers and growers alike now seem resigned to sharply lower yields this summer. May London wheat closed GBP6.00/tonne higher at GBP199.00/tonne with new crop Nov up GBP10.50 to GBP191.00/tonne. Nov Paris wheat rose EUR10.50/tonne to EUR242.00/tonne whilst May climbed EUR10.75/tonne to EUR245.75/tonne.

Nov11 London wheat set a new lifetime contract high of GBP191.25/tonne and closed within GBP0.25/tonne of that. Nov12 closed at it's own new lifetime contract high of GBP166.50/tonne, up GBP6.50/tonne on the day.

It's amazing how the London wheat old crop/new crop spread has evaporated in just a couple of weeks. Jul11 was a GBP26.00/tonne premium to Nov11 at the beginning of May, at the close of today that differential has narrowed to just GBP4.00/tonne.

French analysts Agritel today estimated the soft wheat crop there at just 31.7 MMT this year, which they say is 11.5% down on last year despite a 2% rise in planted area. The reduction is "a direct consequence" of inadequate rains over the past three months, they add.

The French weather outlook for the next ten days remains dry.

"Europe is being dominated by a warm ridge of high pressure. A much stronger ridge in April intensified heat and dryness worsening stress on winter grains. In May, the ridge is weaker, permitting a few showers here and there. This week’s forecast calls for scattered rains. Abnormal heat will continue shifting to Eastern Europe," say Martell Crop Projections.

"The warm ridge over Poland extends into European Russia. This is good news for increased spring planting in the Russia Black Earth and Volga, very key growing areas. The spring started out cold and wet causing worries over whether all the intended grain would be sown," they add.

Meanwhile US wheat futures opened sharply higher in afternoon trade. A blocking ridge over Western Canada is seen keeping unusually wet weather in the Corn Belt and Central Plains. That means more planting delays for spring wheat, although there are some beneficial moisture chances for HRW wheat areas further south too.