Global wheat remains strong following this week's bullish USDA report, with both MGEX spring wheat and European milling wheat for December delivery reaching fresh contract highs Friday.
The December Paris milling wheat contract closed higher for a second day on Friday, ending EUR 5.50 metric ton (mt) higher to reach a fresh contract high of EUR 276.75/mt, while closing at EUR 276/mt. This session's close is only 4 euros away from testing the 2011 high of EUR 280/mt. The next chart test is the 2008 weekly high of EUR 295/mt. DTN analysis points to rumors that China may be stepping up to purchase wheat from France.
Since releasing the first 2021-22 estimates in the month of May, USDA has increased the European Union's export potential in four of five months, including a recent 500,000 mt increase in the October WASDE report to 35.5 million metric tons (mmt), which exceeds the current 35 mmt forecast for Russia.
As seen in the lower study, the Dec/March futures spread or inverse increased to EUR 5.75 this week, close to the largest weekly inverse of EUR 6/mt seen over the life of the spread. Over the past four years, this spread has averaged at a EUR 2.56/mt carry (March trading over the December) on this date, trading at a carry on three of the past four years.
Not shown is the relationship between European milling wheat and the Chicago soft red winter contract. The continuous active spread chart shows a close at $50.86/mt on Friday, with European milling wheat trading over Chicago in U.S. dollars/mt. This is the highest spread seen since July 2014. If you look at the past three calendar years, this spread averaged $18.16/mt in 2020, $23.92/mt in 2019 and $34.93/mt in 2018.
The current move in European wheat would indicate Chicago wheat will eventually be supported, after closing unchanged this week, the only front-month contract that failed to achieve gains over the week.
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