EU Wheat Close

08/09/11 -- Nov London wheat closed GBP1.50/tonne lower at GBP169.00/tonne with Jan down GBP2.25/tonne at GBP170.50/tonne. Nov Paris wheat fell EUR1.00/tonne to EUR205.50/tonne with Jan declining EUR1.25/tonne to EUR206.25/tonne.

The market seems to be in consolidation mode ahead of Monday's USDA reports. They (the USDA) had better have something bullish up their sleeves or things look set to fall out of bed (again).

Demand is sluggish, and what buying interest is out there is getting mopped up by Russia, and now Kazakhstan. Ukraine also has oodles of wheat, barley and corn to sell but is keeping it's fingers crossed that the government there may rescind export duties. That looks unlikely this side of 2012, but even so all that does is provide a widening of the window of opportunity for the aforementioned two brothers in arms.

Tomorrow's USDA weekly export sales data may provide some further clues as to world demand. I suspect that the numbers may be disappointing, showing at the very least that paper buyers' pricing ideas are well above those that physical users are willing to pay.

US grain bulls in particular have developed an air of invincibility of late and are maybe losing sight of what the real market can afford, if that is they ever had a handle on that side of things anyway.

The pound had a volatile day ahead of the BOE announcing that it was keeping interest rates on hold. That was no surprise to anybody, although the fact that they also left QE on hold appeared to catch a few shorts unaware, hence the pound appreciating later in the day.