EU Wheat Posts Contract Highs

03/07/12 -- EU grains closed mostly sharply higher with soon to expire Jul 12 London wheat up GBP8.25/tonne to GBP198.25/tonne and Nov 12 GBP3.50/tonne higher at GBP178.00/tonne. Aug 12 Paris wheat fell EUR0.25/tonne to EUR234.00/tonne but Nov 12 was EUR4.00/tonne higher at EUR236.00/tonne.

Fresh contract highs were posted as the US drought continues and various analysts throw their hats into the ring with predictions on corn yields in the range of 150-155 bushels/acre, around 7-10% lower than where the USDA currently line-up. They will issue revised production estimates next week.

Outside markets were supportive with crude oil up more than USD3.00/barrel on Middle East tensions and a Norwegian strike that has cut back production. Iran’s parliament are said to have drafted up a bill to block the Strait of Hormuz to oil tankers heading to countries that support EU sanctions.

Ukraine’s Ag Ministry said that Ukraine exported 21.8 MMT of grains at the end of the 2011/12 marketing year, up 81% from a year ago. Of that total they exported 13.86 MMT of corn , 5.17 MMT of wheat , and 2.58 MMT of barley.

Russia's IKAR said yesterday that they had exported 27.8 MMT of grains in 2011/12,  of which wheat accounted for 21 MMT. Neither country is expected to come anywhere near close to those totals in the season ahead after drought and winter kill look to have curtailed production sharply.

That should leave EU wheat well-placed to recapture some lost ground to important export homes in North Africa after a pretty disappointing 2011/12 season.

Talk that the ECB will lower interest rates on Thursday may see further euro depreciation, aiding export prospects further.

French crops are looking well, with FranceAgriMer last week pegging wheat good/excellent ratings at 73% compared to just 27% at the same time a year ago. Corn is rated 73% good/excellent from 64% this time in 2011.

Yield prospects in the UK are also looking highly promising, all we need now is some sunshine to ripen up the barley and dry things up and the combines can get rolling. Unfortunately there isn't much of a prolonged dry spell in the forecast.