July 24, 2006

 

Europe cash wheat: Prices surge in weather-driven market

 

 

European cash wheat prices jumped Friday (Jul 21) in classic weather-driven buying as late-season heat has taken the top off of this season's yields.

 

This combined with crop problems in other key producing parts of the world.

 

French standard wheat, basis delivered Rouen for July-August rose to as much as EUR122.00 a tonne, up EUR4.00 on the day. Wheat for October-December delivery was up EUR3.00 early at EUR124.00/tonne, but by late afternoon had climbed to as much as EUR126.00/tonne.

 

Traders continue to point to a lack of selling interest by producers, especially as prices continue to jump so quickly.

 

In addition, due to the optimistic crop outlook held back in late May and early June, the lower-than-expected yields have caught some consumers off guard.

 

French November milling wheat soared EUR5.50 by late session to trade at a new contract high of EUR131.50/tonne with 4,262 lots traded. Daily volume in November alone surpassed the total daily volume record set earlier this week.

 

"The market has gone mad," said a broker who also pointed to increased interest by the funds.

 

Adding to the nervous buying momentum, French corn futures also surged. While half of that crop is irrigated, the heat is hitting during the key pollination period. November French corn was up EUR6.25 at EUR142.75/tonne with 288 lots traded.

 

In Germany, B-quality wheat deliver Hamburg was bid at EUR126.50/tonne with offers at EUR127.00/tonne. This compares to EUR124.00/tonne Wednesday and EUR115.00/tonne to EUR116.00/tonne a month ago.

 

Most traders are now estimating that the German crop will yield around 23 million tonnes, which they say is still an average crop, compared with estimates made earlier in the season for 24 million to 25 million tonnes.

 

London November feed wheat was up GBP3.25 or nearly 4 percent at GBP85.25/tonne, with 329 lots traded. A fresh contract high of GBP83.35/tonne was posted in Friday's strength.

 

The U.K. wheat is just starting up, which is a couple of weeks ahead of normal. Still most agronomists say the recent heat has mostly cancelled out the benefits of May's favourable rainfall.

 

Some traders hold that the market has now prices itself well above Black Sea prices, which will greatly limit near-term demand.