EU Wheat Comments

EU wheat futures closed a quiet session mixed Friday with conflicting influences pulling the market in either direction.

A sharply firmer dollar was friendly to prices, but crude fell to a four and a half year low adding a bearish tone.

It is worth noting that January crude was expiring Friday, leaving the board at $33.87/barrel as long-holders got squeezed out on the last day, unable to take delivery due to storage problems Cushing, Oklahoma - the delivery point for West Texas Intermediate Crude. In contrast the February contract closed at $42.34/barrel.

Paris March milling wheat closed up EUR1.25 at EUR130.75/tonne, London May feed wheat ended down GBP0.15 at GBP104.35/tonne.

It was a low volume session as traders begin to pack up ahead of the Christmas holiday season.

It's been a very volatile week on the currency front and that has dominated everything. Sterling fell from a high of $1.5615 early Thursday to a low of $1.4815 Friday, an eight cent move in one day!

The pound setting fresh all-time lows against the euro every day last week except for Friday supported London wheat throughout the week.

EU export business has slowed however, much of what has been shipped since new crop being old sales that were already on the books. Fresh orders are needed to shift the bulk of our surplus in 2009.

As ever, competition from Russia and Ukraine is fierce.

Looking further ahead, Strategie Grains reported this week that European Union grain production in 2009-10 will come in at 292 million metric tonnes, down 6% on the year.

With lower wheat plantings also expected in the US, China, Russia and Ukraine this will not leave a lot of room for a crop disaster somewhere in one of world's leading producers next season.