December 8, 2010

Australian weather woes boost European wheat, corn

European wheat and corn prices has been discreetly soaring to highs since mid-September as predictions for an abundant world feed wheat crop damped expected corn demand.

The wheat spread on Paris's NYSE Liffe exchange more than doubled from its November 26 low of EUR9.75 (US$12.86) on the January contracts to EUR27 (US$35.62) as milling wheat prices climbed to two-and-a-half year highs of EUR242.50 (US$319.88) a tonne.

The move comes as torrential rains in Australia have downgraded hopes for the country's crop. Analysts now predict up to 40% of the harvest there may be unfit for human consumption, leaving millions of tonnes for animal feed.

"The large quantity of Canadian and Australian feed wheat this year might help to reduce the pressure on the corn feed use," said Macquarie.

Wheat and corn are both used for livestock feed.