EU Wheat Follows US Markets Higher

EU wheat posted strong gains Monday, following the lead set by US markets despite a weak dollar and firmer sterling and euro.

Paris November milling wheat closed up EUR3.50 at EUR165.00/tonne, whilst London November feed wheat ended up GBP3.50 at GBP134.50/tonne.

There are crop concerns and lower production estimates for 2009 from just about all the major exporting nations besides Australia, and they have only just begun to plant and have a long way to go to harvest just yet.

Fund money appears to be re-entering commodities, as a bit of risk appetite re-emerges and traders look for higher yielding investments.

Outside markets were also firmer which lent some support, with crude oil breaching $68/barrel and US stocks hitting a seven month high despite the demise of General Motors.

A sharply weaker dollar will do little to aid EU wheat sales abroad, but this seemed to be easily shrugged off by the market.

The London July/Nov spread widened to GBP10.50/tonne, an enormous differential, which will only serve to discourage old-crop sales even further.

It's highly unusual for new crop to offer any premium over old crop at all, let alone more than a tenner. Unfortunately I don't have the data on this to hand, but I wouldn't be surprised if this isn't the largest four month old crop/new crop carry in history.