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Wheat Market Update - Friday 13th June 2008
UK & Europe
Prospects for an increased EU wheat crop continue to look favourable; however, the concerns over the widespread rainfall/flooding in the US Midwest have driven EU wheat prices sharply higher.
November London International Financial Futures Exchange (LIFFE) wheat futures have risen by circa £14/t from recent lows,and are currently trading in the range of £148-£152/t. Growing confidence that a large European wheat crop will pressure prices lower has been prevailing of late but if the weather situation deteriorates in the US prices could spike sharply higher once again.
Bread making wheat premiums remain firm and will not be tested until we have a better assessment of harvest quality.
US and World
Widespread flooding and high rainfall levels have delayed completion of corn plantings and have led to concern that yields will be cut back.
Fuelled by the ongoing strength of crude oil, investors have bought heavily in the corn market and pushed July corn futures to an all time high.With the weather outlook still calling for heavy rain in some areas, it is this that will lead price direction in the short term.
If analysts continue to lower corn production it will provide spill over support to wheat markets
Summary
The first real signs of how nervous the market remains to any adverse weather globally were seen this week. Price volatility has been extreme once again, with many remembering how a similar situation began a year ago. Over the coming weeks as we approach the main Northern European harvest traders will watch vigilantly the situation in the US.
Presently in the EU conditions remain favourable but the market is indicating that large-scale downward price pressure should not be assumed; especially against the backdrop of low closing stocks and rising global demand.
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