February 9, 2010

EU wheat up slightly as commodities steady following sell-off

European wheat futures edged higher on Monday (Feb 8), steadying after being swept up in the sell-off that affected commodities last week.

"As commodities fall out of favour with fund managers, international wheat buyers have been active," said UK farmer-owned cooperative Openfield, noting Iraq's recent wheat purchase.

March Paris milling wheat traded up by 0.6% to EUR0.75 (US$1.03), with 2,260 lots moved at EUR125.75 (US$172) per tonne. London May feed wheat traded up by 0.2% to GBP0.20 (US$0.27), with 132 lots moved at GBP100.50/tonne (US$137).

Competition for export business remains stiff.

"Ample supplies in all major origins and fierce competition for export markets will continue to be the market's dominant features in the coming months," said Societe Generale in a commodities note on Monday.

Meanwhile, cold weather is affecting trade particularly within the EU. "Internal EU trade has been slow with Northern EU struggling with logistics as ice affects the barge traffic," said Openfield.

The news of further upward revisions to 2009-10 world wheat production was bearish for the market.

Germany-based F.O. Licht raised its forecast to 675.5 million tonnes, from 674 million tonnes in January, despite EU production being revised slightly lower. Previously, 2008-09's record crop is seen at 8.7 million tonnes lower.

"The second sizable harvest in a row has filled bins around the world, and has put pressure on wheat prices internationally, as ending stocks for the season are expected to be large," said Keith Flury, analyst at F.O. Licht.

Lower expected results from the EU are due to smaller area. Dry conditions in Syria were offset by larger outputs from Russia and Kazakhstan.

Standard-quality wheat prices in the French cash market delivered at Rouen were unchanged from Friday's (Feb 5) prices at EUR114/tonne (US$155).

Paris-based May rapeseed traded up by 0.1 % to EUR2.75 (US$3.76), with 1,909 lots moved at EUR289.25/tonne (US$396). Liffe Paris March corn traded up by 0.2% at EUR0.25 (US$0.34), with 300 lots moved at EUR132.75/tonne (US$181).