Global Wheat Outlook: EU Focus
BMI V iew: We believe EU wheat prices have found a bottom around the EUR175/tonne level, in line with our view for global wheat prices to bottom around the USc640/bushel level. Technicals show signs that EU prices are set to turn around, while record import demand from the Middle East will soon deplete EU regional stocks and help prices higher. Ultimately, however, we believe upside risks for EU wheat prices are slightly less significant than for CBOT wheat prices, as import demand will now shift to the Black Sea region and the US.
We believe EU wheat prices have found a bottom around the EUR175/tonne level, in line with our view for CBOT wheat prices to bottom around the USc640/bushel level and for the global market to tighten from September onwards. On the technical side, the weekly relative strength index for EU wheat prices is now in oversold territory, indicating little room for prices to come down in the near term. Net speculative long positions for wheat are also at a record lows, and any concern over global supply will help prices higher in the near term.
On the fundamental side, we believe recent strong import demand from the Middle East will soon deplete EU wheat stocks and tighten the regional market. Industry sources have recently indicated that the EU exported twice as much wheat since the start of the 2013/14 season as it did over the same period in 2012/13. In fact, EU export licenses since July 1 climbed to 4.5mn tonnes, from 2.1mn tonnes over the same period in 2012 and the most since at least 2004.
|EU Milling Wheat (EUR/tonne, weekly) & RSI (below)|