EU Wheat Close

22/07/11 -- EU grains finished mostly lower with Nov London wheat GBP2.00/tonne easier at GBP161.00/tonne and Nov Paris wheat down EUR1.25/tonne to EUR193.00/tonne.

On the week as a whole Nov London wheat was down GBP4.00/tonne and Nov Paris wheat fell EUR7.00/tonne.

Brussels granted export licences for 236,000 MT of soft wheat and 140,000 MT of barley this past week. Not a bad performance considering the competitiveness of Black Sea grain at the moment.

Russian wheat export potential just keeps growing. The USDA have them down to export 12 MMT this season, up 200% on last season. The local Ministry have them down to increase exports by 300% and the Russian Grain Union by 350-400% to 18-20 MMT.

We are clearly talking production telephone numbers here, and regardless of weather problems in the US or quality issues in the EU, increases in volume of this sort of magnitude are clearly going to put a cap on price appreciation potential.

Using an exchange rate of 1.1350 for the pound against the euro London feed wheat for Nov is only around 10 euros cheaper than French milling wheat, two months ago that gap was around 22.50 euros. That appears to overvalue London wheat.

EU producers are reluctant sellers whilst the harvest remains stalled, that may change somewhat once we finally get going. We shall see.