EU Wheat Posts Strong Weekly Gains

Posted by Nogger - a legend in his own mind at 10:37 | Categorized as

06/07/12 -- EU grains closed mostly a little lower to end the week with expiring Jul 12 London wheat going off the board unchanged at GBP204.25/tonne and Nov 12 GBP1.25/tonne lower at GBP180.50/tonne. Aug 12 Paris wheat fell EUR1.75/tonne to EUR243.25/tonne whilst Nov 12 was also EUR1.75/tonne lower at EUR242.00/tonne.

Today's dips mirrored a lower move to end the week across the pond in Chicago. Probably only to be expected after a week of strong gains in the midst of a weather market as we head into the weekend.

For London wheat, a July future has never gone off the board this high before as it closed the week GBP16.25/tonne higher than it began it. The Nov 12 future put on GBP9.50/tonne compared to last Friday's close.

Aug 12 Paris wheat was EUR14.25/tonne higher on the week, and Nov 12 rose EUR15.25/tonne.

Excessive rains continue to fall across much of the UK and on the continent too, delaying the harvest and causing some real quality concerns. Milling wheat premiums have really jumped in the past couple of weeks.

US drought concerns continue to drive the market, having sparked a real feeding frenzy this week. Although in the case of wheat the US winter harvest is probably now more than three quarters complete and spring wheat crop conditions are very promising at 71% good/excellent.

Corn is what is really getting the market excited, even though a record crop could still be on the cards according to the FAO and IGC, by virtue of the large increase in planted area this year. The USDA will issue their own revised estimate next Wednesday.

Following yesterday's news that the BoE was increasing QE and that the ECB was lowering interest rates, the pound closed the week at 1.26 against the euro, it's highest level since Nov 2008. That won't help UK exports too much in the new 2012/13 season given that Europe is far and away our largest wheat buyer.

The EU-27 finished the 2011/12 marketing campaign exporting 12.5 MMT of wheat (down around a third from the 18.5 MMT exported in 2010/11), 2.9 MMT of barley (-37%) and 3 MMT of corn (+200%).

Extreme volatility remains. The market has moved up a long way in a relatively short period of time, with Nov 12 London wheat up 22% and Nov 12 Paris wheat up almost 24% since mid-May. Chicago corn has gone from being at its lowest levels in 17 months on Jun 1st to being at its highest in more than a year as of Thursday night's close.