EU Wheat Close

27/06/11 -- EU grains closed sharply lower with July London wheat down GBP7.65 to GBP155.00/tonne and with new crop Nov falling GBP5.00/tonne to GBP158.50/tonne. Nov Paris wheat closed EUR8.25/tonne lower at EUR187.50/tonne whilst May12 fell EUR7.50/tonne to EUR194.00/tonne.

We haven't seen a front month close this low on London wheat since early October, and we are now GBP62.50/tonne, or 29%, lower from the highs set little more than two months ago.

For Paris wheat this was the lowest front month close since last July.

Chicago grains offered little in the way of encouragement, with shell-shocked bulls there pinning their hopes on reports of corn sales of 230,000 MT to unknown, of which 130,000 MT was for the 2010/2011 crop year and 100,000 MT for the 2011/2012 marketing year.

The suggestion is that these sales may have been to China but the market reaction was uninspiring. That news/rumour would have got the market surging a couple of months ago. Today it caused hardly a ripple. That is probably indicative of the current market situation in which we now find ourselves, bullish news is largely ignored and bearish news seized upon. The complete polar opposite of where we were a few months ago.

Reports of a major rain event for all of the Ukraine/Black Sea area should seal the crop there. SovEcon now peg Russia's 2011 grain crop at 82-86 MMT.

At home old crop wheat's fall from grace may be at least partially attributable to reports of substantially higher wheat stocks than most market participants realised/expected a few months back. Demand from the feed sector has also fallen off a cliff and of course there's no hungry Ensus to rely on at the moment either.

That explains why July has now slumped to a GBP3.50/tonne discount to Nov, when just a month ago it was a GBP25.00/tonne premium. Old crop wheat is now trying to price itself at a level which attracts consumer demand with the harvest now only four weeks away.

End-user buyers however are very few and far between. It's not that the consumers don't want wheat at these levels and are buying something else, they simply don't want anything at the moment. Other products such as wheatfeed, soya hulls and citrus pulp are equally friendless.