EU Wheat Drifting Aimlessly

EU wheat futures continued to drift along aimlessly Monday, in what has all the classic hallmarks of being a typically very subdued week.

March Paris milling wheat futures closed up EUR0.25 at EUR131.75/tonne, and London May feed wheat futures ended up GBP0.55 at GBP109.80/tonne.

It's extremely unlikely that anything too significant is going to happen this week (or next) as the entire trade winds down for the festive period.

January might be interesting and provide far more fireworks. The long-awaited opening of the Ensus bioethanol refinery on Teesside, coupled with the possible re-emergence of fund money flowing back into the grains sector, is the best hope that the bulls might have of a rally.

It is certainly quite possible however that too many long holders are pinning all their hopes on these two factors saving the day in 2010.

More than one pundit is looking at the GBP8.25/tonne premium that Nov10 is currently commanding over Jan10 and saying that this is too high. It seems that the UK are in for a wheat crop of at least 1 MMT more next year, and quite likely nearer 2 MMT more, which immediately negates any extra demand from Ensus.

What about Vivergo? Well, who'd like to stake a large quantity of cash on that facility starting up on time right now? Certainly not me.

Meanwhile the price of wheat might not be great, but the price of barley is a total disaster. That means that the EU will produce a wheat crop some 3.6 MMT higher in 2010, according to Strategie Grains, and in addition to that there is the small matter of Lord knows how much intervention barley we will have looking for a home by then too.