Is Nov 16 London Wheat A Sell Or A Giveaway?

24/03/16 -- EU grains closed moistly higher heading into the long weekend Easter break.

At the close of trading, new front month May 16 London wheat was up GBP0.25/tonne at GBP105.00/tonne. In Paris, May 16 wheat closed up EUR1.50/tonne at EUR156.50/tonne, Jun 16 corn was up EUR1.75/tonne at EUR155.75/tonne and May 16 rapeseed rose EUR0.50/tonne to EUR364.00/tonne.

As you might expect trade was thin.

The week ends with the May/Nov 16 London wheat premium now at GBP13.75/tonne. In their first report of 2016, Rabobank said that it expects Chicago wheat prices at around $4.75/bu in Q1 of 2017. That's around $20, or 4%, below the level that's on offer for the Dec 16 future tonight.

"Heavy inventories, ongoing aggressive export competition, plus a projection for continued building of US 2016-17 stocks should cap rallies," they note.

Paris wheat futures meanwhile currently appeared "very good value" compared with Chicago prices. Paris wheat is currently offering a 8.6% premium basis Dec 16 versus the nearby May 16 contract.

Although they didn't comment on London wheat specifically, that would suggest that the 13.1% extra offered here for the new crop Nov 16 represents something even better than "very good value".

FranceAgriMer left French wheat crop conditions unchanged on a week ago at 92% good to very good (90% a year ago). Winter barley conditions were also unaltered at 93%, three points up compared with 12 months ago.

They said that 65% of the French winter wheat crop is now displaying an ear of at least 1cm versus 47% a week ago and 40% this time in 2015.