EU Wheat: Have Recent Rises Been Overdone?

08/02/12 -- EU grains finish lower with Mar 12 London wheat down GBP2.50/tonne to GBP167.00/tonne and Mar 12 Paris wheat slumping EUR5.50/tonne to EUR216.00/tonne.

Consolidation after recent rises was perhaps a sensible thing ahead of tomorrow's USDA reports.

There's also a feeling that EU wheat may have got a little ahead of itself, backed up by talk that Spain has bought 200,000 MT of US wheat in recent weeks. That's business that Britain and France would normally expect to get a slice of.

Since the mid-December lows Paris wheat had increased in price by over 23.5%, with London wheat rising 20% as opposed to US wheat "only" going up by 14% - based on yesterday's closing levels.

Certainly weekly soft wheat export licences issued by Brussels have been lagging during this period. We haven't seen one week with sales above 250,000 MT since the market started to rise, and in fact only two out of the past six have scraped above the 200,000 MT mark.

The Siberian conditions across Europe are restricting grain movements, which may provide some small window of opportunity for one or two countries to make sales for immediate shipment to where wheat is needed. Domestic consumer demand in the UK however is poor at these levels.

The Rosario Grain Exchange said today that recent rains have greatly improved chances for soybean production there. There were heavy falls of up to 3.5 inches overnight and there's more in the forecast for tomorrow.