August 24, 2007

 

EU wheat rally on tight stocks; record intra-day highs

 

 

European wheat futures traded on Liffe continued their bullish run on tight global supplies to finish up sharply, but off the record highs posted earlier in the session as the buying frenzy waned.

 

"There is just no bearish news," said a European trader.

 

Traders cited the combination of sharp gains in Chicago Board of Trade wheat futures, a lower-than-expected Canadian crop figure, the International Grains Council's cut to its global wheat output forecast, and continued strong global demand despite the high prices.

 

Paris-based November milling wheat ended up EUR4.75, or 2 percent, at EUR236.50 a tonne, with 3,387 lots moved. Earlier, November set a record high of EUR241.50/tonne, well above the previous record set last week at EUR232.50/tonne and marking a rise of 88 percent from the low set in early April.

 

London-based November feed wheat closed up GBP5.50, or 3.6 percent, at GBP159/tonne with 303 contracts traded. Earlier, November set a record top at GBP162/tonne, well above the previous mark set Wednesday at GBP154.30/tonne, and up 94 percent from the April low.

 

Helping to take some wind from the bullish sails, CBOT wheat futures erased most gains following an initial strong rally to fresh record highs.

 

"It is such a hectic market, and you just don't know where it is going to go," said a French trader.

 

The trader estimated that about 80% of the current small dealings being conducted are cooperatives buying back grain from exporters because they are not able to fulfil contracts.

 

Most of the EU wheat crop has been troubled with low specific weights, a measurement of quality, following lengthy rains at harvest. The rains also lowered yields.

 

The trader added that the quality premium for French milling wheat over standard wheat remains at EUR12/tonne-EUR13/tonne.

 

French standard cash wheat delivered to the main port of Rouen was as much as EUR9.50 at EUR237.50/tonne for nearby to December delivery. However, a trader said it was hard to obtain a secure price because it changes so quickly.

 

IGC Thursday cut its forecast for the 2007-08 EU wheat crop by 3.9 million tonnes to 122.8 million. IGC also cut its world wheat crop estimate by seven million tonnes to 607 million.

 

Adding to the nervousness over grain supplies, the bulk of France's corn harvesting is expected to be delayed following this summer's cool and wet conditions. There are also some concerns that problems with pollination lowered yields.

 

In other Liffe agricultural markets, Paris-based November corn ended up EUR2.50 at EUR234/tonne with 390 lots moved. Earlier, November set a record high at EUR237/tonne, surpassing the previous record, set earlier in the month, of EUR236/tonne.

 

November rapeseed ended up EUR6.25, or 1.9 percent, at EUR332/tonne with 439 lots moved. Support stemmed from gains in EU sunflower cash prices and CBOT soybean futures.