EU Wheat: Review Of The Week

EU wheat futures closed higher again Friday with Paris November milling wheat finishing up EUR3.00 at EUR156.00/tonne, and London November feed wheat closing up GBP2.50 at GBP128.50/tonne.

On the week Paris November future put on gains of EUR12/tonne and London November contract GBP4.50/tonne.

The gains are quite impressive coming in the wake of a weak dollar. The pound gained 3 cents on the week to close above $1.52, sterling's highest closing level against the greenback since December 17th 2008. The euro also added 3 1/2 cents against the dollar over the course of the week to hit one month highs.

In the UK the May/Nov spread currently offers an impressive GBP11/tonne carry premium, and in Paris a slightly more modest, but still significant, EUR10/tonne.

Dryness in parts of Europe, frost in the Ukraine and excessive wetness in much of the US and Argentina are all seen reducing the 2009 world wheat crop substantially from the bumper 2008 harvest.

In Chicago wheat, corn and soybeans all posted strong performances across the week, with a US crop tour saying that yields in Kansas will be lower than expected. Kansas is the largest producing state in the US, and the one that the trade had been hoping would bail out states like Oklahoma and Texas which seem set for disastrous production this year.

The Oklahoma Grain and Feed Association say that the harvest there will produce only 77.5 million bushels of wheat this year, that is less than half of what the state produced in 2008.

Meanwhile, early season flooding and continued wet and cold weather continues to hamper farmers' attempts to plant the spring wheat crop in North Dakota, the largest US producer, which was only 3% completed as of last Monday compared with 51% on average. There is clearly potential there for plenty of wheat not to get planted at all, and what does to produce lower than anticipated yields.