EU Grains Surge Higher On US Weather

25/06/12 -- EU grains closed sharply higher with Jul 12 London wheat up to GBP188050/tonne and Nov 12 London wheat rising GBP6.45/tonne to GBP168050/tonne. Aug 12 Paris wheat rose EUR5.75/tonne to EUR220.00/tonne and Nov 12 was up EUR8.50/tonne to EUR225.00/tonne.

These were more than 12-month highs for both Nov 12 London and Paris wheat as US weather across the weekend remained hot and dry. Forecasts for the week ahead offer more of the same with temperatures in the Midwest set to hit 100F.

"Corn silking and pollination is advancing in the earliest planted fields. This is a yield-sensitive period of crop development that demands .20 inch of moisture, per day, for successful kernel development. There is not enough ground moisture to supply increasing crop needs on the majority of Midwest farms," said Martell Crop Projections.

The USDA is expected to cut corn good/excellent crop condition ratings by around 3-5% this evening.

Chicago corn touched limit up (plus 40 cents) in afternoon trade, dragging wheat with it.

Adding fuel to the fire was Russia's Ag Ministry cutting their grain production estimate from 94 MMT to 85 MMT, a drop of almost 10% on last year due to winterkill and spring drought. Export potential will fall 26% to 20 MMT from 27 MMT this season, they added.

Similarly, Ukraine's national weather centre forecast the grain crop there at 43-44 MMT vs the Farm Ministry's estimate of 48-49 MMT and compared 54 MMT in 2011/12.

The market is extremely excited, and now almost universally bullish, by the news coming out of America (which is bullish for corn rather than wheat) and is backed up by reduced production estimates for Black Sea wheat.

For now, European debt concerns appear to have been placed on a very low simmer at the back of the hob. Almost a lone voice in the wilderness today was billionaire investor George Soros calling on Europe to start a fund to buy Italian and Spanish bonds, warning that a failure by finance leaders at this week's EU summit to produce drastic, tangible and credible measures to stave off the debt crisis could spell the demise of both the eurozone and the euro.