March 16, 2010

EU wheat futures seen up slightly on weaker euro

The EU wheat futures are flat to slightly higher in range-bound trading, buoyed by weaker European currencies against the dollar, traders said.

EU wheat futures are rising due to a weaker euro and sterling pound making exports more competitive, a London-based trader said.

But the trader noted that physical trading is still relatively thin since some EU farmers are refraining from selling at such low levels.

Paris May milling wheat ended flat at EUR121.75 a tonne, with 8,173 lots moved. London May feed wheat closed up GBP0.2, or 0.2%, at GBP94.80 per tonne, with 258 lots moved.

A London-based trader said EU wheat futures were even higher earlier in the day but pared back gains in afternoon trading due to a drop in US wheat futures.

The strengthening dollar against most currencies continues to make US wheat export sales less competitive against stiff competition from countries in the Black Sea region and Europe.

The short term outlook for US export sales "remains gloomy given the lack of competitiveness of U.S. wheat on export markets and export pressure from Russia, the EU and, potentially, India," said Societe Generale's agricultural commodities analyst Emmanuel Jayet in a note.

The global wheat market is expected to report a 37-million-tonne surplus in the 2009-10 harvest period compared to a 49-million-tonne surplus in 2008-2009, according to Societe Generale.

Global production is expected to fall 1.2% to 675 million tonnes in 2009-10 while global demand is expected to rise 0.8% to 638 million tonnes, the bank's forecasts showed.