EU Wheat Close

15/06/11 -- EU grains tried to arrest their recent sharp declines but failed miserably with July London wheat finishing GBP5.00 lower for the second day in a row at GBP178.00/tonne and with new crop Nov falling GBP2.25/tonne to GBP175.00/tonne. Nov Paris wheat closed EUR3.50/tonne lower at EUR212.50/tonne whilst May12 also declined EUR3.50/tonne to EUR219.50/tonne.

Both London and Paris wheat were a little higher in early trade but got caught in the crossfire of tumbling Chicago corn futures which saw front month July at down the daily 30c limit at the time that London closed.

July London wheat has lost GBP40.00/tonne in less than two months, with Nov falling GBP24.25/tonne from a contract high of GBP199.25/tonne in less than three weeks.

Trade in London was relatively quiet with many participants away at Cereals 2011 in Lincolnshire. The vibe coming back from that was that crops there looked better than many had expected. Also there were some heavy showers throughout the day which maybe coloured a few people's judgement.

The NFU used day one of the event to publish their first forecast for English wheat, saying the the crop here would yield 6.5 MT/ha (a more than 20 year low) and production total "under 12 MMT" - a fall of around 15% on the five year average.

Based on recent performances such news would have been greeted with London wheat trading ten pounds higher, but not today. The whole of the ag sector looks tired, and you have to wonder about the foundations of a market when such ostensibly bullish news is greeted by a sharp downwards move. Much as we have also witnessed recently in Chicago corn, which has fallen 60c, or 7.6%, since the USDA's bullish stocks report was released last week.

Some of the smart money seems to be leaving the building before things get too nasty. Greece now has the lowest credit rating of any country rated by Standard & Poor's. EU policymakers can't seem to reach a consensus on a second bailout for the country and meanwhile protests against austerity measures turned violent in Athens today.

NYMEX crude oil fell by more than USD4/barrel to a four month low today.