EU Wheat Closing Comments

Nov London wheat closed GBP0.75 easier at GBP162.25/tonne, with Nov Paris wheat down EUR3.50 at EUR228.75/tonne.

French analysts Strategie Grains cut their EU-27 soft wheat production estimate to 127.2 MMT, they also reduced their estimate of the percentage of the crop suitable for milling to around 55%, from 66% last year and 68% two years ago.

However, due to the lower grade of this season's crop they also cut their export estimate to countries outside the bloc to 17.4 MMT from 18.7 MMT last month and 18.8 MMT last season.

Overall barley and corn production was also reduced to 52.4 MMT and 56 MMT respectively.

The UK wheat crop looks like coming in around 15-15.4 MMT based on ADAS yield estimates, an increase of 4-7% on last year. Meanwhile this year's rapeseed crop could come in as high as 2.4 MMT, 23% higher than last season's crop and comfortably beating the previous record UK production of 2.1 MMT in 2007.

Front month Paris wheat has now failed to break through the recent contract high of EUR236/tonne a few times, and closed below support at EUR230/tonne for the first time in a week.

US weekly export sales fell well short of expectations today, and included cancellations from business pre-booked to Egypt for the current 2010/11 marketing year and the next.

Russian and Eastern Ukraine concerns, whilst legitimate, seem to be fully factored in at these levels.

There seems to be a growing feeling of "how much more bullish news can there be" developing. A firmer euro/sterling, large spec long position and a likely price-induced sharp increase in global plantings just around the corner appear to suggest a correction is overdue.