EU Wheat Close - Friday

Posted by Nogger - a legend in his own mind at 14:16 | Categorized as

19/08/11 -- EU grains finished higher supported by afternoon gains in Chicago with Nov London wheat closing up GBP1.05/tonne to GBP163.55/tonne and Nov Paris wheat ending EUR4.25/tonne higher at EUR201.75/tonne.

On the week overall London wheat was up GBP0.40/tonne and Paris wheat EUR3.00/tonne firmer. On the month so far London wheat is down GBP0.10/tonne, whilst Paris wheat is up EUR4.00/tonne.

Global economic worries continue to dog the stock market with the FTSE100 down 13% on the month so far, with losses on the French Cac at 18% and the German Dax at 24%. Clearly, the grains sector has done well to hold or even appreciate slightly under these circumstances.

How long they can resist if outside markets continue to fall remains to be seen. The fact that they've managed to buck the trend thus far would suggest that a recovery in equities would see grains rally, possibly significantly. Personally however I wonder if this is merely just the start of a hefty roller-coaster slide into the dreaded double dip recession, which I feel would likely drag grains down with it.

On the fundamental front, Agritel fell into line with other analysts by raising their French soft wheat production estimate to 33.2 MMT following heavy rains in June and July. That's 7% down on last year, but substantially better than what was expected a few months ago.

Egypt bought 180,000 MT of Russian wheat and 60,000 MT of Romanian wheat in their tender this week, once again shunning more expensive EU and US grain.

Brussels issued 233,000 MT of soft wheat export licences this week, bringing the marketing year to date total to 1.5 MMT, 0.9 MMT down on a year ago. Imports meanwhile are running at 2.2 MMT during the same period, an increase of 1.9 MMT.

Hence this time last year we were a net exporter of 2.1 MMT of wheat, so far this season we have been a net importer of 0.7 MMT.

Domestic demand from the feed sector remains sluggish at best, and other ingredients competing with wheat in the rations are starting to show signs of capitulating.