EU Wheat Futures Post Strong Gains

EU wheat futures closed with impressive gains amidst good volume Tuesday, with Paris March milling wheat finishing up EUR8.25, or 5.6%, at EUR151.50/tonne, with 5,698 lots moved. London May feed wheat also closed up strongly +GBP3.30, or 3%, at GBP115.05/tonne, with 534 lots moved.

The rise in London wheat was all the more impressive considering the pound's strong rally against the euro over the last couple of days.

Investment funds were active buyers of wheat, which explains the volume done, in order to re-adjust their portfolios to reflect wheat's revised higher weighting in the Dow Jones-AIG commodities index.

Wheat will now be the eighth largest commodity among the index's 19 commodities, moving up one place from last year.

Widespread sub-zero temperatures across much of the UK and the Continent overnight, and the promise of more to come, raised concerns that some winter wheat crops will suffer winterkill damage.

Crude oil rising by around a third in the first few days of trading since the close of 2008 also lent some support. However, traders are mindful that the Gaza onslaught will hopefully not continue for much longer, and that the Russian problems over gas supplies to and via Ukraine will also be resolved before long.

It may be interesting to note that in Carr's Millings' Q1 report they refer to "fertiliser sales having been much reduced." This is surely not a one-off and in reality typifies the situation across the rest of the UK, much of Europe and possibly even a large part of the world.

An EU-27 wheat crop planted in cold, wet, claggy ground that may be significantly undernourished in the spring could be a real cause for concern when harvest-time finally comes.

Before that of course we still have a huge exportable surplus to dispose of!

The US market has traded higher the last few sessions, despite largely missing out to the Black Sea on any export orders going. The attitude there, for now at least, seems to be let the distressed sellers get out of the market, any export sale is better overall than none.

The USDA are out Monday with a 2009/10 winter wheat plantings figure, with a reduction of anywhere from 1-3 million acres being touted. Crunch time will also come in the spring when US farmers need to decide if the economics make nitrogen and phosphorus application a viable proposition.