EU Wheat Ends With Little Change

EU wheat futures closed with little change Thursday, having dropped very sharply since the beginning of the month maybe a bottom is in sight?

Paris November milling wheat closed up EUR0.25 at EUR145.50/tonne, and London November feed wheat ended flat at GBP117.50/tonne.

Egypt cancelled its wheat tender, offering no rational explanation. Trade gossip suggests that maybe they were testing the market to see who offered what. There was no clear indication as to whether they regard the recent quality problems with Russian as water under the bridge.

Also in the news today were reports that Strategie Grains dropped their EU-27 grain production estimate by 6.4 MMT. Of that soft wheat output was reduced by 2.6 MMT.

Most of the usual newswires are full of stories about burdensome old crop stocks, and that you can't seem to buy a bullish story for wheat at the moment. I think that if you look beyond the rhetoric, the supply and demand picture for 2009/10 is actually quite tight, and has the potential to get worse.

Wheat production in Argentina will surely be significantly lower than current "official" estimates, and output in Australia could also be slashed if an El Nino event takes hold.

With a misjudged global drive towards bio-ethanol production from wheat on the cards, the supply/demand ratio is set to get one whole lot tighter in the next few years.