EU Wheat Slides

Posted by Nogger - a legend in his own mind at 18:33 | Categorized as

16/02/11 -- EU wheat closed sharply lower for the second session in a row with Mar London wheat down GBP6.00 to GBP201.00/tonne and new crop Nov down GBP6.35 at GBP170.65/tonne. Mar Paris wheat fell EUR5.00 to EUR261.50/tonne, with Nov down EUR4.75 to EUR234.00/tonne.

Weak speculative longs seem to be getting forced out of what has suddenly turned into a very volatile market. Old crop London wheat closed at contract lows on the day, whilst Nov11 traded as much as GBP13.00/tonne lower at one stage, before rebounding to close with losses of around half that.

The probability that Brussels is about to suspend EU feed wheat and barley import duties next week could open the door for significant volumes of foreign wheat to enter the bloc.

ABARES say that despite all sorts of problems this year Australia's wheat crop is up 20% to 26.3 MMT this season. Much of that this time round is of course feed wheat looking for a home.

Argentina meanwhile are set to put the finishing touches to a 15 MMT wheat crop, double last season's output, on the back of "exceptional" yields. That puts them firmly back on the world export stage after an absence of a couple of years, with their largest crop since 2007/08.

It seems that the world isn't going to run out of wheat after all, much to the bulls' disappointment. It's March in a fortnight which means that India's anticipated 82-85 MMT harvest is almost upon us, they will soon be harvesting in North Africa too, which may slow demand from that quarter somewhat.

Egypt did however buy three cargoes of wheat today, one of which was French origin (the other two were from the US). So there is still some buying interest out there, it just isn't for feed wheat. The downside for that has to be quite considerable from here I'd say.

In the shell of a nut, end users simply don't want it at these levels, and they'll want it even less come May.

Meanwhile at current lofty heights wheat continues to magically appear out of the woodwork, both domestically and internationally. Ukraine have decided to release an extra 1 MMT of wheat (and 1.7 MMT of corn) onto the market. They will be looking to sell anything that isn't nailed to the floor again when their harvest starts in June too.