EU Wheat Closing Comments

Nov London wheat closed GBP0.75 lower at GBP152.25/tonne, with Nov Paris wheat EUR4.75 lower at EUR203.25/tonne.

On the week overall London wheat declined a fraction under GBP10.00/tonne and Paris futures fell just over EUR20.00/tonne.

A surprisingly high Sept 1st corn stocks estimate from the USDA yesterday has got the died in the wool US corn bulls spooked. That has triggered a sharp downwards correction in heavily overbought conditions, undermining EU grains as well. US wheat stocks were also towards the upper end of expectations and the largest since the 1987-88 crop year.

The corn number suggests that US prices at two year highs are indeed rationing demand.

A sharply higher euro has accelerated French wheat declines, relative to those in London, despite a robust start to the 2010/11 exporting marketing year. The pound slumped below 1.15 against the euro today for the first time since May.

Brussels granted export licences for a 2010 marketing year record of just over a million tonnes of soft wheat this past week, taking the year-to-date total to 6.35 MMT compared to 4.7 MMT at this point last season. Most, if not all, of that was probably sold some time ago at substantially lower levels.

Crop conditions in Argentina are improving and a wheat crop 50% higher than last season is on the cards. Meanwhile potential production in Australia is a moot point, with output in the west likely to be sharply lower on drought, Southern Australia state was hit by a frost this week, whilst crops in the east look like being at of near record levels.