EU Wheat Closing Comments

EU wheat futures closed higher Friday with Paris March milling wheat up EUR2.25 at EUR148.50/tonne. London May feed wheat closed up GBP1.25 at GBP116.00/tonne.

DEFRA cut its estimate for the UK's 2008 crop by almost a quarter of a million tonnes pegging the final UK crop at 17.23mmt. Whilst this could be construed as mildly supportive, the exportable surplus is still huge.

Strategie Grains now estimate the UK 2009 wheat crop at 15.85mmt, down slightly on last month's estimate, and now 8% lower than 2008's crop.

Indeed 8-10% lower now seems to be a fairly general rule of thumb for most of the wheat crops in the northern hemisphere, with US plantings forecast down by this amount by the USDA Monday. The overall EU-27 crop and the Russian crop are also seen falling by a similar amount.

Very cold temperatures in the US may have done some winter kill damage over the last couple of months, but in Europe the threat is currently seen as minimal.

Forex is all over the place at the moment. The pound started the week at $1.51, before plunging to $1.45 where it stayed for most of the week, then rallying late to within sight of $1.50 only to fall back to $1.47 by the close Friday. At least against the euro we seem to have stabilised in the 1.10-1.12 range.