EU Wheat Closing Comments

It's been a while since we've seen a close like this, probably not since early 2008. November London wheat closed GBP4 higher at GBP115/tonne, November Paris wheat was up EUR4 at EUR154.25/tonne. November corn was up EUR6.75 at EUR160/tonne, November rapeseed EUR2 higher at EUR328.75/tonne and January malting barley up EUR6.50 at EUR179/tonne.

Sellers largely seem to have run for the hills as talk of significant yield losses brought on by the recent hot and dry spell abound.

A combination of a hard winter, a dry spring and now surging temperatures possibly accelerating EU cereals towards a rapid and early maturity suddenly seems to have everyone talking about lower production.

The Russian Ag Ministry today dropped their 2010 grain production estimate to 85 MMT, fully 15 MMT lower than they were expecting not too many months ago, and more than 12% down on last year and over 20% down on 2008.

Add that to the problems being experienced by Canadian growers, the reduced US acreage, and lower wheat output now expected from Ukraine and Kazakhstan and suddenly most of the major exporting nations are now looking at significantly lower output in 2010. Only Australia and Argentina look likely to see production growth this year, and their crops have only just been or are still being planted.

Before you start ordering the new farm equipment and flicking through holiday brochures to the Maldives it is worth remembering that we do still have significant carryover stocks from 2009/10, not to mention some pretty hefty barley intervention stocks in the EU.

We also have new crop stocks now starting to filter through from Russia, the FSU and southern/eastern Europe as well as new crop US winter wheat coming onto the market. It would be a shame to get too carried away and miss an opportunity here, it could be prudent to get some sales on at these levels, especially to cover cashflow requirements this side of Christmas. If an opportunity is likely to present itself to make further sales at significantly better money than this then they may not present themselves again until the new year.