EU Grains Close

19/05/11 -- EU wheat futures closed higher, although well off session highs, with May London wheat up GBP6.00/tonne to GBP205.00/tonne and with new crop Nov up GBP2.50/tonne to GBP193.50/tonne. Nov Paris wheat rose EUR2.00/tonne to EUR244.00/tonne whilst May12 was EUR2.25/tonne higher at EUR248.00/tonne.

Nov London wheat peaked at GBP199.25/tonne, up GBP8.25/tonne on the day, a fresh lifetime contract high and just short of the magical GBP200.00/tonne mark on early bullish euphoria.

Gains were tempered somewhat later in the day however as NYMEX crude oil fell back below USD100.00/barrel and US futures retreated.

Dryness has undoubtedly harmed EU grain potential in most of the major producing nations, that is beyond question, what we don't know yet is by how much. Private estimates suggest that it may be by far more than the likes of the USDA and Coceral suggest.

Before the bulls get too carried away with high fives all round it should of course be noted that Ensus has opted to take a temporary shutdown rather than continue turning wheat into bioethanol at these levels.

It would also be very interesting to know what is going through the minds of the multi-nationals behind the under-construction Vivergo plant at Saltend right at this moment in time.

Meanwhile inflation here keeps creeping up, rising to a 2 1/2 year high of 4.5% in April, with food and fuel prices leading the way.

The cure for high prices is high prices, they say. I think that we must be wary of demand destruction at these levels.