November 16, 2010

EU wheat rebounds, US corn soars

Western European wheat markets recovered some of last week's losses on Monday (Nov 15) amid a sharp rebound in US corn triggered by the growing Chinese corn demand that had extended its imports from South America.

CBOT corn soared more than 5% to claim back steep losses on Friday (Nov 12) as rumours China was buying Argentine corn gave extra fuel to a technical rebound.

The recovery in European prices also reflected sentiment that the pullback on Friday (Nov 12) in a broad sell-off in commodities was overdone given bullish fundamentals for wheat.

"We fell a long way on Friday (Nov 12) even though the market fundamentals remain supportive," a French futures broker said.

In Paris, January milling wheat was up EUR5 (US$6.82) or 2.35% at EUR214.5 (US$292.67) a tonne, after sliding 4% in the previous session. Resistance was seen around EUR220 (US$300.18) where a chart gap had formed during Friday's (Nov 12) fall.

Operators were waiting to see if last week's pullback would spark fresh demand after high prices deterred buyers in recent weeks.

"It's the US market that sets the trend, beyond that it will be the timing of any pickup in demand," an export trader said.

Wheat prices in the euro zone were also underpinned by fresh weakness in the euro, which already saw a six-week low against the dollar on Friday (Nov 12) amid worries about Ireland's debt.

Feed wheat futures in London were little changed, with the market seen consolidating in the near term after a run-up to a 2-1/2-year peak early last week got followed by a steep setback.

January feed wheat in London was up GBP1 (US$1.61) or 0.60% at GBP167.5 (US$269.29) a tonne. The contract peaked at GBP179 (US$287.78) on November 9, the highest level for second month since April 2008, but fell sharply late last week.

Dealers said the pace of UK export sales continued to indicate supply tightness later in the season.

"If all the committed exports get done we are going to be very tight early next year. Maybe we need to actually execute wheat we've committed to do, then the UK and French markets will tighten up and the next time the market goes up it will be able to stay there," one dealer said.

Germany's market remained weak, with low demand outweighing the strength in Paris. Standard bread-quality wheat for November delivery in Hamburg was offered for sale down EUR3 (US$4.09) at EUR218 (US$297.45) a tonne with buyers at EUR216 (US$294.72).

"The market was still intensely nervous after the meltdown on Friday (Nov 12) with buyers often on the sidelines in the hope for further price falls. However, we were still maintaining a sizeable premium over Paris prices despite the weak tone," one trader said.

Italian wheat rose a couple of euros on the week on the back of a moderate pick-up in local demand and catching up with gains on major international markets, traders said.

Corn rose EUR7-8 (US$9.55-$10.92) on the week to EUR216-217 (US$294.72-$296.08) a tonne, including delivery charges.