EU Wheat Close
30/08/11 -- EU grains finished mixed with Nov London wheat up GBP2.25/tonne at GBP174.00/tonne and Nov Paris wheat ending EUR3.25/tonne lower at EUR210.75/tonne.
London wheat was playing catch-up following gains in Chicago and Paris yesterday when the domestic market was closed for the Bank Holiday.
The Russian rail authority RZhD said that it had suspended transportation of grain to the major Black Sea port of Novorossiisk as the rail system into the port has become gridlocked. That could give EU wheat a bit of a window of opportunity against Russian wheat still priced USD15-20/tonne cheaper.
Yemen has bought 100,000 MT of Black Sea wheat overnight. So whilst world wheat demand is still good, it isn't EU or US grain that is flavour of the month. US wheat is being supported by the tight corn supply/demand balance and renewed fund appetite for grains.
Concerns about outside influences such as European debt have eased a little in the past couple of weeks, enabling London wheat to close at the highest for a front month tonight since July 5th.
Those worries certainly haven't gone away though. The Eurozone’s Economic Sentiment Indicator fell to 98.3 in August, according to Eurostat, the worst reading since May 2010. The US Conference Board also reported today that consumer confidence there plunged to 44.5 in August - the lowest level since April 2009.
The most likely bearish influence on grain prices for the remainder of 2011 would seem to be the potential for another wholesale exodus of investment money out of the market if (or is it when) EU debt problems get even further out of hand. We've already seen two such flights to safety this year.
The first, which began with the escalation of tensions in north Africa followed by the Japanese earthquake and tsunami, saw London wheat fall GBP40/tonne in a month.
The second, on widespread nervousness surrounding the global economy and the threat of a Greek debt default, saw prices drop GBP37/tonne in two and a half weeks in mid-June.