UPDATE: EU Wheat Settles At 11-month High On Weather Woes

European wheat futures soared Friday to close at their highest point for 11 months, as extreme weather in the former Soviet Union boosted sentiment, while Chicago also added support as the U.S. market responded to domestic dryness concerns.

November Paris milling wheat futures settled up EUR8.25, or 4.0%, at EUR215.25 a metric ton, the new crop contract's highest closing level since June 13, having earlier hit an intra-day high of EUR218.00/ton.

Wheat prices have been buoyed by dry weather conditions in Russia, Kazakhstan and U.S. winter wheat producing areas, Barclays said. While global wheat inventories are still hefty, weather concerns and their impact on supply has supported prices, the bank said.

Jaime-Nolan Miralles, commodity risk manager at FCStone Europe, said Russian dryness will continue to foster a growing sense of nervousness across the wheat world this weekend, with only scattered rains expected over the weekend there.

Indeed, MDA EarthSat Weather said dryness remains extensive across south central Ukraine, central and northern North Caucasus, western Kazakhstan and north central and western Volga Valley.

Drier conditions are expected to continue there over the next 10 days along with very warm temperatures, and with further windy conditions seen over the next few days crop stress will build and yield potential decline, the forecaster said.

Frontier Agriculture said such a turnaround in wheat values, given the very negative sentiment just a week ago, reaffirms concerns that still underpin the cereal complex and highlights the requirement of all the major crop regions around the world to deliver in upcoming harvests.

The U.K. grain merchant, which is jointly owned by Cargill Inc. and Associated British Foods PLC (ABF.LN), said that aside from the questions over wheat, corn's progress will also add to the nervous sentiment, with the grain only just being planted across the main U.S. growing states.

Wheat was also the big mover on the Chicago Board of Trade as the massive speculative short is being pushed out, but RCM Asset Management analyst Doug Bergman said there was nothing to justify the recent rally, despite the weather problems in Europe and the U.S.

-By Michael Haddon, Dow Jones Newswires; 4420-7842-9289; michael.haddon@dowjones.com

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