EU Grains Close

25/03/11 -- May London wheat closed GBP1.00/tonne firmer at GBP197.25/tonne with new crop Nov up GBP3.75 to GBP161.75/tonne. May Paris wheat rose EUR7.00/tonne to EUR236.75/tonne and Nov was up EUR3.50/tonne to EUR207.00/tonne.

At first glance you could say that it's a little strange to see new crop gaining ground on old crop here in the UK, yet the opposite is happening across the Channel.

Quality wheat is however generally what hungry buyers in North Africa and the Middle East want, and France continues to pick up the lion's share of the weekly export business - getting 179,000 MT of the 364,000 MT of soft wheat export licences issued by Brussels in the past week.

Meanwhile Defra this week lowered their estimate for UK H&I wheat usage by 280,000 MT and forecast reduced demand from feed manufacturers.

If we convert UK wheat into euros we get May today valued at EUR224.50/tonne and Nov at EUR184.00/tonne. As you can see UK feed wheat is only a EUR12.25/tonne discount to Paris milling wheat for May, whereas the new crop differential is running at almost double that at EUR23.00/tonne.

On the weather front we've seen strong warming this week spurring stronger growth in wheat and rapeseed, with highs yesterday into the 70s F in central France and mid 60s F in the UK, Germany and Benelux.

Spring has sprung, with the warmth forecast to continue into next week. Scattered showers are in the forecast, here and there, although not enough to compensate for a very dry winter. Drought is most worrisome in central France, Germany, Hungary, Slovakia and the Balkans where only 40-60% of normal precipitation has been received in the past 90 days.

Topsoil moisture is sufficient for crops near term, but moisture stress could be coming if generous rain is not received in the next 2 weeks, according to Martell Crop Projections.