May 18, 2009

European wheat futures edged lower Friday (May 15), under pressure from some light profit taking in the lead up to the weekend, although prices seem supported at current levels.

"UK old crop seems fairly underpinned on decent demand from domestic consumers and the export market," said a UK-based broker.

November Paris milling wheat trade down EUR2.25, or 1.4 percent, at EUR153.75 a tonne, with 2,080 lots traded. November London feed wheat was down GBP1.50, or 1.1 percent, at GBP129.00/tonne, with 222 lots moved.

Brokers are keen to ascertain whether the large premium on new crop futures will lead to larger carryover stocks at the end of the marketing year in June.

"Just as the forward prices look good to hold your old crop against, if you're a consumer the spot prices look cheap - consumers are keen to take advantage," said a UK-based broker. "The gap between old crop and new crop prices will probably narrow as we get closer to harvest."

New crop prices have seen a bit of a setback in recent sessions because of improving weather conditions in some parts of Europe, including the UK which has seen patchy rain. However, brokers believe new crop prices can't fall much further due the weather premium in their prices.

According to Macquarie bank, weather concerns are providing a floor for prices.

It's an "increasingly weather focused market, but one which continues to be held down by ample old crop supplies and a potentially large crop again next season," said Kona Haque, analyst at Macquarie. The bank's near-term outlook for prices is "neutral to bearish."

Standard-quality wheat prices in the French cash market delivered at Rouen were unchanged from Thursday's prices at EUR135/tonne.

Liffe's Paris June corn traded down EUR0.50, or 0.3 percent, at EUR152.50/tonne, with 202 lots moved. Paris August rapeseed traded down EUR2.00, or 0.6 percent, at EUR318.00/tonne with 724 lots traded.