EU Wheat Close

06/09/11 -- EU grains finished lower with Nov London wheat falling GBP1.20/tonne to GBP169.00/tonne and Nov Paris wheat losing EUR1.00/tonne to EUR205.75/tonne.

London wheat has fallen GBP5.75/tonne in the last four trading sessions. The pound rose to 1.14 against the euro but fell to a seven-week low below 1.60 against a resurgent US dollar.

Fresh news remains thin on the ground. Concerns over European debt haven't so much as re-emerged, but surged to the surface gasping for air which is pressuring the euro. The US certainly isn't out of the danger zone yet either, although the flight to safety that saw gold hit another all-time high today is also helping the dollar.

Many that I am talking to are very confused. Plenty now seem to be predicting that the US will slump into a double dip recession. Many are also forecasting that the current EU malaise is only the tip of the iceberg.

What most of them don't seem to know either though is whether this is bullish or bearish for grains.

The huge economic slump of the second half of 2008 into 2009 saw grain (and crude oil) prices fall out of bed in spectacular style. Is there any difference between then and now? Well yes, we've been printing money that we haven't got in the run-up to this particular recession (if we get one).

As sure as eggs are eggs that usually leads to rampant inflation. That should be bullish for grains, yet a wholesale flight to safety out of risk suggests a bearish scenario for grains.

Confused? So am I.