London Wheat Sets Historic High

05/11/12 -- EU wheat provided the appropriate November 5th fireworks with May 13 closing at the highest price ever for a London wheat contract of GBP222.25/tonne.

Front month Nov 12 London wheat closed GBP3.00/tonne higher at GBP215.00/tonne, whilst Nov 13 also pressed on, GBP2.50/tonne firmer at GBP191.00/tonne - both lifetime contract closing highs.

Nov 12 and Jan 13 Paris wheat also set fresh contract highs today, along with new crop Nov 13. Nov 12 closed EUR1.75/tonne firmer at EUR271.00/tonne, finally breaking above the EUR270.00/tonne mark which has proven a stubborn level to breach.

There is a growing feeling that European wheat will be next to fill the void left by the disappearance of Black Sea wheat from the world market, and that supplies here may not last that much longer with strong demand foreseen in Q1 of 2013.

Argentina's wheat crop is shrinking, both in terms of yield and quality, and is forecast at around three quarters sold already despite that fact that the harvest there is only around 10% complete.

Australia's output is also on the decline, with MDA CropCast estimating production at 20.6 MMT, a near 30% drop on last year. Exports are likely to fall by a similar percentage according to a recent Bloomberg survey.

That leaves the US as the main world wheat supplier come Q2 of 2013 (and possibly sooner). Here the winter crop is already under stress due to lack of moisture and there is little relief from that in sight, ahead of winter dormancy.

"Drought has worsened in the Great Plains winter wheat zone in recent weeks, the 35-day rainfall map showing acute dryness in Texas, Oklahoma and southern Kansas, the 3 states that together produce 43% of US winter wheat," say Martell Crop Projections.

"High pressure is expected to produce unseasonable warm and dry weather the next 5 days in the Central and Southern Great Plains," they add.

"Dryness remains extensive across the central Plains, and the continued drier pattern there this week will allow significant dryness and stress on wheat establishment to continue," say MDA CropCast, who also warn that "poorly established wheat will be more vulnerable to freeze threats this winter."

EU prospects for 2013 are already looking a serious concern too, hence new crop Nov 13 London and Paris wheat both hitting contract highs today. Sowings are said to be well behind schedule for this time of year in all four of Europe's top producing nations: France, Germany, UK and Poland.

Elsewhere, the USDA attaché in Beijing estimated China’s 2012/13 wheat crop at 108.0 MMT versus 117.4 MMT in 2011/12. China's wheat imports have been on the rise recently, those for Jan-Sept  were a 7-year high and Q1 2012/13 imports topped 1 MMT versus a USDA forecast for a full year requirement of only 1.5 MMT from abroad.